WASHINGTON (DC News Now) — The price credit card holders pay for late fees may soon be slashed if a new federal proposal announced Wednesday by the Consumer Financial Protection Bureau goes into effect.
The “immunity provision dollar amount for late fees” allows companies to charge for the costs of processing late fees, but the Biden administration argues those same companies are charging up to five times more than the actual cost to do so.
President Biden labeled the fees upwards of $41 as a “junk fee;’ a term used by financial advisors and policymakers alike to describe an increased cost to products and services used by consumers.
White House officials moved to crack down on those ‘junk fees’ in October.
The CFPB proposed implementing a rule to cap the base fee associated with late credit card payments at $8, but companies could raise the cap if they can prove processing expenses will be more costly.
“Even our basic essentials are going up, so, I feel like it would beneficial to just give people or even myself if I had a lot of credit card debt, just give them time to pay it off,” a woman who identified herself as Charlene told DC News Now on Wednesday.
If approved, the federal proposal would also end an automatic adjustment to late fees; and the CFPB would implement changes based on “market conditions,” according to the draft.
“I know that a few people that is has impacted, and they’re close to me,” said Borna Afzali in DC’s Glover Park neighborhood. “Lower late fees would mean people would have an easier time to… make their payments.”
Finally, late fees would be capped at 25% of the required minimum payment. The CFPB said card issuers can currently charge up to 100% of minimum payments.
While the late fee changes would not impact him personally, Jack Everett said, “I guess it wouldn’t hurt if it was lower. I’m sure it affects more low-income people or people who live paycheck to paycheck.”
The CFBP said the public has 30 days to submit comments to the Bureau’s proposal before changes could go into effect.