INDIANAPOLIS — A new ruling out is expected to lower the typical credit card late fee from $32 to $8 for issuers that have a million or more open accounts.
The Consumer Financial Protection Bureau's final rule also eliminates the automatic annual inflation adjustment for the $8 late fee threshold.
"This will be an average savings of $220 per year for the more than 45 million people who are charged late fees," the group said in their press release.
It is part of President Joe Biden's goal to get rid of junk fees.
So, how did we get these large late fees in the first place?
In 2010, a regulation was issued making it clear banks could only charge fees for costs associated with late payment. But there was a provision, the CFPB said, that allowed credit card companies to sidestep accountability and charge more.
However, large card issuers can charge more than $8 for a late fee, as so long as they can prove the higher fee is necessary to cover actual collection costs.
The effective date of the final rule will be 60 days after publication of the rule in the Federal Register.