Credit Card Late Fee Final Rule Coming Soon?

Based on recent activity by the Consumer Financial Protection Bureau (CFPB), many experts are wondering if it portends the CFPB will soon issue a final rule on credit card late fees. Back on Feb. 1, 2023, the CFPB issued a 191-paged proposed rule that would amend Regulation Z in the following ways:

  • Adjust the safe harbor dollar amount for credit card late fees to $8.
  • Eliminate a higher safe harbor dollar amount for late fees for subsequent violations of the same type.
  • Stipulate that annual inflation adjustments for the safe harbor dollar amounts would not apply to the late fee safe harbor amount.
  • Provide that late fee amounts must not exceed 25% of the required payment.

While we wait to see if the proposed rule will be finalized, two recent announcements by the CFPB indicate it might be setting the stage to issue the final rule soon. First, on Feb. 16, 2024, the CFPB released the first set of results from the Terms of Credit Card Plans survey. The survey data revealed large banks are offering worse credit card terms and interest rates than small banks and credit unions, regardless of credit risk. The survey showed the 25 largest credit card issuers charged customers interest rates of 8-10 points higher than small- and medium-sized banks and credit unions. Also, large issuers were more likely to charge annual fees. Among large issuers’ credit cards, 27% carried an annual fee, compared to just 9.5% of small firms. The average annual fee was $157 for the largest issuers, as opposed to $94 for smaller issuers.

Second, on Feb. 22, 2024, the CFPB released a blog post announcing credit card interest rate margins are at an all-time high, plus issuers generally charge interest based on annual percentage rates (APRs) to cardholders who carry a balance without paying it off in full each month. In 2022 alone, major credit card companies charged over $105 billion in interest, the primary cost of credit cards to consumers. Over the last 10 years, average APR on credit cards assessed interest have almost doubled from 12.9% in late 2013 to 22.8% in 2023 — the highest level recorded since the Federal Reserve began collecting this data in 1994.

Doeren Mayhew's regulatory compliance pros will continue follow any updates the CFPB releases pertaining to the final rule on the horizon. Have additional questions in the meantime? We stand ready to support you. 

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John Zasada
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John Zasada is a Principal in Doeren Mayhew's Financial Institutions Group, where he assists financial institutions in navigating regulatory compliance.

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