In 2010, Congress passed the CARD Act to regulate the way in which credit card companies charged fees. It was meant to provide transparency and protection for consumers against high fees. However, these companies found a loophole.
Credit card companies were restricted to charging a $25 late fee for a first occurrence and $35 for a second. With inflation adjustments, those amounts increased. The Consumer Financial Protection Bureau (CFPB) found that those companies collected over $130 billion in fees. Their new regulation changes this.
On March 5, the CFPB ruled that late fees can be at most $8 per occurrence, regardless of how often a late payment is received. The average that Black credit card holders paid was $32. This move will save American consumers nearly $14 billion in fees annually. The regulation will go into effect in May, or 60 days after it was announced in the Federal Register.
Research and reports have found that Black credit card holders, on average, paid $10 more in fees than other credit card debt holders. This new regulation from the CFPB will not only level the fee field but also save Black consumers money.
The recent regulatory change that has capped credit card late fees at $8 represents a significant shift in the financial landscape, providing consumers with much-needed protection against excessive and fluctuating penalties. This measure promotes greater transparency and fairness within the credit card industry and alleviates the financial burden on individuals who may have inadvertently missed payment due dates.