Credit Card Late Fees


What It Is

The White House and CFPB have finalized a new rule that would arbitrarily limit credit card late fees, part of a misguided campaign conflating hidden fees in other industries with clearly disclosed credit card fees. This could raise costs for consumers, reduce access to credit cards, and damage credit scores because of more missed payments.

This rule is part of the Biden Administration’s overarching political campaign to arbitrarily characterize relatively any fee charged to a consumer as “junk,” seeking to reduce fees in several industries and receiving national recognition in the President’s State of the Union Addresses.

Why It Matters

Banks may be forced to increase rates and offer fewer credit options to mitigate the risk associated with more missed payments. All cardholders, including the 74% who pay on time, could see lower credit lines, tighter standards for new accounts, and increased annual percentage rates. Additionally, reducing late fees would remove an important motivation for consumers to make on-time credit card payments.

What We Believe

Washington politicians are seeking to “fix” a credit card system that isn’t broken by advancing ideologically driven policy proposals devoid of facts or reality.
This rule ignores that the likely impact will be higher costs and no benefits to consumers, while failing to consider that issuers are required to manage credit risk portfolios.
The CFPB’s rule relies on insufficient and improper data analyses to draw misleading conclusions. It also dismisses peer-reviewed economic literature that shows the deterrent effect of late fees in favor of the Bureau’s own back-of-the-envelope calculation that has none of the same academic rigor and is not statistically significant.

What do Americans think?

~ 60%

A majority of Americans (nearly 60%) believe credit card late fees are legitimate, according to a CBA survey released in April 2023. Shockingly, the survey also found that most people fail to understand the consequences if they pay late, which could happen much more frequently if the fee is lowered.

~ 48%

Nearly half of Americans (48%) mistakenly believe nothing happens if they pay their credit card bills late.


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