Washington, D.C. – President Joe Biden announced the administration’s latest move to reduce credit card late fees, with estimated savings for American families amounting to $10 billion annually. The Consumer Financial Protection Bureau finalized a rule that is expected to lower the typical $32 late fee to $8.
During a meeting with the Competition Council, President Biden emphasized that over 45 million Americans could save an average of $220 per year due to this rule change. He criticized banks for profiting excessively from late fees, stating that they generate five times more in fees than it costs to collect late payments.
CFPB Director Rohit Chopra praised the new rule for ending the practice of credit card companies increasing fees under the guise of inflation, which ultimately benefits their bottom lines. The rule addresses a loophole in the CARD Act that allowed credit card issuers to charge escalating fees for late payments, capping them at $8 and preventing automatic fee increases based on inflation.
Industry groups representing major banks and credit card issuers have opposed the rule, arguing that it could lead to higher interest rates for consumers. The Consumer Bankers Association and American Bankers Association expressed concerns about potential negative impacts on competition, credit access, and consumer debt levels.
The CFPB’s rule is set to go into effect in mid-May and will apply to issuers with over 1 million open accounts. President Biden highlighted this rule as part of a series of actions aimed at reducing consumer costs and promoting economic policies that benefit Americans.
In addition to the credit card late fee rule, Biden’s administration has taken steps to address “junk fees,” launch a “Strike Force” targeting unfair business practices, and protect farmers and ranchers from anti-competitive behavior in agricultural markets. These efforts are part of a broader strategy to lower everyday costs for Americans.
These initiatives underscore President Biden’s commitment to addressing consumer financial issues ahead of the upcoming election and demonstrate the administration’s efforts to promote fairness and transparency in various industries, ranging from credit cards to agriculture and telecommunications. Biden’s upcoming State of the Union address is expected to further emphasize the administration’s actions to benefit American consumers.