The Consumer Financial Protection Bureau said Tuesday that it has finalized a new rule to sharply lower the typical credit card late fee from more than $30 down to just $8, a move that could save consumers billions of dollars annually and is expected to face a swift industry challenge in court.
The rule, which hews closely to a CFPB proposal from a year ago, focuses on a more-than-decade-old regulatory safe harbor that acts as a de facto cap on credit card late fees. This safe harbor defines fee amounts below which a bank is presumed compliant with a 2009 statutory ban on excessive card fees.
These amounts are indexed to inflation and have risen over time, currently allowing banks to charge up to $30 to $41 per late fee. Tuesday’s final rule slashes these safe harbor amounts to a flat $8 and ends their inflation-indexing, just as the agency proposed last year.
Unlike that original plan, however, the final rule has been scaled back slightly to apply just to larger card issuers, or those with at least 1 million open accounts. Even with this concession, the agency said the rule will cover more than 95% of all outstanding balances in the credit card market.
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