Millions of Americans could soon see lower credit card bills after a federal rule that caps late fees at $8 a month was finalized on Tuesday by the Consumer Financial Protection Bureau, which estimates that the change will save households $10 billion a year.
Late fees have become a major profit source for credit card issuers, generating more than $14 billion in 2022, according to bureau data.
A 2010 rule imposed by the Federal Reserve aimed to cap the charges, but allowed adjustments for inflation — a provision card issues have used to raise their fees far beyond the actual costs they incur when payments arrive late, the bureau said.
That allowed credit card companies to “harvest billions of dollars in junk fees from American consumers,” said Rohit Chopra, the bureau’s director.
It applies only to large issuers that have more than one million open accounts, but the agency estimates that the rule will cover 95 percent of outstanding credit card balances.
Persons:
”, Rohit Chopra, “
Organizations:
Consumer Financial Protection Bureau, Federal Reserve