May 3, 2023 — Press Release

Consumer Advocates Strongly Support “Fair, Reasonable, and Proportional” Rule to Reduce Credit Card Late Fees

WASHINGTON — Advocates with the National Consumer Law Center and eight other advocacy groups submitted comments today in response to the Consumer Financial Protection Bureau’s (CFPB) proposed rule limiting credit card late fees. The groups say the proposed rule will save consumers billions of dollars each year in late fees and put that hard-earned money back in their pockets.

“We strongly support the proposed safe harbor of $8 for credit card late fees and thank the CFPB for proposing it,” said Chi Chi Wu, senior attorney at the National Consumer Law Center. “Unlike the previous safe harbor amounts of $30 and $41, $8 is a fair amount that is reasonable and proportional to the costs incurred by credit card companies for late payments.”

Penalty fees that greatly exceed the costs incurred by a company when a consumer pays late, known as “super-compensatory” fees, are harmful because they become a huge profit center. They create incentives for companies to engage in tactics to trigger late payments, which are often through unfair or abusive practices. 

The CFPB’s proposed rule would establish the $8 amount as a “safe harbor.” Credit card companies could charge more if they can justify the amount by showing that $8 does not adequately compensate them for their costs in dealing with late payments. Advocates encouraged the CFPB to require credit card companies to publicly disclose the data relied upon to justify higher amounts to “show their math.”

“The CFPB showed its math in coming up with the amount of $8,” said Ruth Susswein, director of consumer protection at Consumer Action. “To date, credit card companies have failed to provide adequate explanation for any alternative figure.” 

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