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Credit card debt can be difficult to get rid of, and high interest rates aren’t the only reason why. Card issuers also make a handsome profit from late fees, which can be up to $41 per instance. They’re currently raking in about $12 billion from late fees alone, and it’s seriously hurting consumers who may sometimes only be a few hours late on their bills.
A new proposed Consumer Financial Protection Bureau (CFPB) rule aims to add new restrictions to credit card late fees, and it estimates that this could save Americans up to $9 billion per year. Here’s what you need to know about it and how you can make your voice heard if you want to see this change enacted.
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The three major changes the CFPB wants to make to credit card late fees
Though Congress technically banned excessive late fees over a decade ago, credit card issuers have continued to charge them, thanks to a loophole in the law. The CFPB estimates that the average credit card late fee is about five times as much as the actual collection costs the credit card company pays to get the money it’s owed.
It aims to remedy this by making the following three changes:
Cap the maximum late fee at $8: Card issuers can currently charge up to $41, but the new rule would reduce this to $8, or about one-fifth of the current maximum in order to bring them into alignment with the actual costs the credit company incurs to collect a late payment. Card issuers could only charge more than this if they proved that it cost them more than $8 to collect what they’re owed.End automatic adjustments for inflation: Currently, the maximum late payment is adjusted annually for inflation. But if the CFPB has its way, this would end. It would take on the responsibility of monitoring market conditions and increasing the maximum credit card late fee as appropriate.Cap late fees at 25% of the minimum payment: If a credit card has a $30 minimum payment, the most the card issuer would be able to charge consumers for a late payment would be $7.50 under this new rule. And if the minimum payment was lower, the maximum late payment would be reduced as well.
Again, these are just proposals at this point. The CFPB is currently taking comments from the public to see whether people are in favor of this rule change.
How to make your voice heard
If you think the CFPB should make the changes outlined above, reach out with your comments before April 3, 2023. There are a few ways you can do this, including:
Leaving a comment online through the Federal eRulemaking PortalSending an email to 2023-NPRM-CreditCardLateFees@cfpb.gov using subject line “Docket No. CFPB-2023-0010” or “RIN 3170-AB15″Mailing your comment to 2023 NPRM Credit Card Late Fees, c/o Legal Division Docket Manager, Consumer Financial Protection Bureau, 1700 G Street, NW, Washington, DC 20552
The CFPB will typically post all comments received on its eRulemaking Portal without change, so don’t include any personally identifying information, like your name, the names of family members, or your credit card or Social Security numbers.
If you know others who have been hurt by excessive credit card late fees, encourage them to leave a comment as well. Hopefully, with enough support, this new rule can help ease the strain millions of Americans face when trying to manage their finances and escape credit card debt.
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