The Washington Post reports that the federal Consumer Financial Protection Bureau (CFPB) announced that “it would sharply limit the fees that credit card companies can charge customers who fall behind on their bills, aiming to cap the penalties at $8 in a move that is expected to draw fierce resistance from financial giants … Under the new regulations, credit card issuers including Bank of America, Capital One, Citibank and JPMorgan Chase cannot charge more than $8 for a late payment unless they can explicitly point to data showing they must impose higher fees to make up for losses.
“In issuing the restrictions, the Consumer Financial Protection Bureau said the government intends to close a legal loophole that had allowed some financial giants to charge an average of $32 per month for a missed or late payment. The amount has proved onerous for some cash-starved cardholders, while enriching the credit card industry, which reaped more than $14 billion in revenue from late fees in 2022, according to the CFPB.”
The Post writes that “the rules arrive as part of a suite of fresh federal efforts to promote competition and crack down on unfair or illegal pricing across the economy, which President Biden has blasted as one of the primary sources of rising costs facing American families over the past year.”
The CFPB “said the government intends to close a legal loophole that had allowed some financial giants to charge an average of $32 per month for a missed or late payment. The amount has proved onerous for some cash-starved cardholders, while enriching the credit card industry, which reaped more than $14 billion in revenue from late fees in 2022.”
According to the story, “The policy is set to take effect later this spring, and it could save cardholders about $10 billion each year, according to the bureau, which estimates that about 45 million people have faced such fees. But its fate remains unclear, because the banking industry is expected to sue the CFPB, adding to the agency’s legal woes as the Supreme Court is weighing the future of its funding and regulatory powers in a separate pending case.”
KC’s View:
At least some percentage of that annual savings of $10 billion can be expected to be spent by shoppers – which means it will go right back into the economy.
I’m sure there will be litigation. Someone will argue that the CFPB is an unconstitutional agency. There will the suggestion that this is a purely political move by an administration hoping to get a second term (which would, of course, be the first time any administration did that).
But a billion here and a billion there, and pretty soon you’re talking about real money, and shoppers who will have some percentage of it in their pockets.
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