The transfer is anticipated to drop the everyday bank card late payment to $8 from $32.
March 5, 2024, 3:42 PM ET
7 min learn
President Joe Biden on Tuesday touted his administration’s latest effort to slash bank card late charges in a transfer that is estimated to collectively save households $10 billion yearly.
The Consumer Financial Protection Bureau finalized a rule Tuesday that may reduce the everyday bank card late payment to $8 from $32.
“That’s the common of $220 in financial savings yearly for greater than 45 million Americans who sometimes must pay late charges. A variety of money,” Biden mentioned whereas assembly together with his Competition Council.
“We estimate banks are generated 5 occasions extra in late charges than it prices to gather late funds. They’re padding their revenue margins,” he mentioned.
“Today’s rule ends the period of massive bank card corporations hiding behind the excuse of inflation after they hike charges on debtors and increase their very own backside strains,” CFPB Director Rohit Chopra mentioned in a press release.
The company mentioned its new rule closes a loophole in a federal legislation known as the CARD Act that allowed main bank card issuers to cost prospects rising charges after they have been late on their funds. Over time, these late expenses ballooned to as a lot as $41. The new rule would cap them at $8.
It would additionally stop card issuers from mechanically rising charges primarily based on inflation.
Industry teams representing large banks and bank card issuers have opposed the rule, arguing it might drive them to boost rates of interest they cost customers.
“The rule’s coverage targets are, at finest, client redistribution, not client safety,” the Consumer Bankers Association, which represents banks and bank card issuers, mentioned in a press release.
“Today’s flawed last rule won’t solely cut back competitors and improve the cost of credit score, however can even end in extra late funds, increased debt, decrease credit score scores and diminished credit score access for many who want it most,” American Bankers Association President and CEO Rob Nichols mentioned in a press release. “The Bureau’s misguided determination to cap bank card late charges at a stage far beneath banks’ precise prices will drive card issuers to scale back credit score strains, tighten requirements for brand spanking new accounts and lift APRs for all customers – even those that pay on time.”
The CFPB’s rule is anticipated to take impact in mid-May. It applies to issuers with greater than 1 million open accounts.
Biden administration officers mentioned “a handful of huge banks” account for $14 billion in bank card late charges charged to American households yearly.
Biden highlighted the rule together with a handful of different actions he is taking to attempt to decrease prices and to promote his financial insurance policies as benefitting Americans forward of November’s election.
He singled out a brand new report from the Council of Economic Advisers that the administration’s actions on “junk charges” alone will save Americans greater than $20 billion yearly.
He’s additionally introduced the launch of a brand new “Strike Force” to crack down on unfair and unlawful practices that hold costs excessive.
The “Strike Force” will goal conduct that hikes costs on Americans by means of “anti-competitive, unfair, misleading, or fraudulent business practices,” and deal with areas akin to “pharmaceuticals and well being care, meals and grocery, housing and monetary providers.”
The Competition Council additionally introduced efforts to go after poultry and meat processors by asserting a finalized new rule to guard farmers and ranchers and promote aggressive agricultural markets.
One different space they’re tackling is “bulk billing” by web suppliers, particularly highlighting a proposed Federal Communications Commission rule that may ban the apply the place landlords cost everybody dwelling or working in a building for a selected web, cable or satellite tv for pc service, even when they do not need it or have not opted in.
This determination to focus on these efforts to avoid wasting Americans money comes two days earlier than Biden delivers his State of the Union deal with, wherein he is anticipated to put out the work his administration has completed to decrease on a regular basis prices for Americans.
