The Biden administration is taking steps to limit credit card fees, aiming to end “junk fees” that burden consumers. Under the proposed rule by the Consumer Financial Protection Bureau, credit card late fees would be capped at $8, unless banks can justify charging more. This move is expected to reduce the average late fee from $32 and cut into the estimated $14 billion annual revenue from credit card late fees earned by banks.
President Biden has prioritized eliminating junk fees as a key aspect of his economic plan leading up to the 2024 presidential election. The White House Council of Economic Advisers projects that this effort could save consumers $20 billion annually by addressing various fees, such as those related to concerts, apartment rentals, and auto dealers.
Past initiatives have targeted credit card fees, including the 2010 CARD Act, which prohibited penalty fees and improved consumer disclosures. The Federal Reserve also implemented rules in 2010 to cap credit card late fees and late payment fees, linking them to inflation.
Consumer credit card debt has surpassed $1.05 trillion, with interest rates at their highest levels since the mid-1990s.
