WASHINGTON, D.C. — A trio of U.S. senators on Thursday introduced legislation to lock in an $8 cap on credit card late fees, reviving a consumer protection rule stalled in court and setting up a fresh fight with the nation’s largest banks over billions of dollars in annual charges.
The Credit Card Fairness Act, sponsored by Sens. John Fetterman, Cory Booker, and Tammy Baldwin, would place into federal statute a Consumer Financial Protection Bureau rule capping late fees at $8. The CFPB rule was halted amid litigation brought by major banks, leaving in place standard late fees that typically range from $30 to $41.
Backers of the bill argue those fees generate roughly $14 billion a year for credit card issuers while far exceeding the cost of collecting late payments. They say the gap allows banks to profit from customers already struggling to keep up with bills.
“Big banks profiteering off people by charging $41 for a single late credit card payment is absolutely wrong,” Fetterman said, calling the measure a protection for working families facing rising costs. Booker said the legislation would keep money in consumers’ pockets by setting a clear ceiling on fees that he described as several times higher than collection costs.
Baldwin framed the proposal as relief for households under pressure, saying families do not need additional financial strain from penalty fees that make it harder to stay afloat.
Consumer advocates lined up behind the bill. Ericka Taylor, co-executive director of Americans for Financial Reform, said excessive late fees inflate bank profits while eroding household budgets. Adam Rust of the Consumer Federation of America said penalty fees should not function as profit centers and that the bill restores fairness to consumer credit.
Support also came from Groundwork Collaborative, the National Consumer Law Center, Public Citizen, and Protect Borrowers. Advocates cited estimates that the cap could save more than $200 a year on average for the roughly 45 million people who incur late fees.
Aaron Klein, a senior fellow at the Brookings Institution, criticized the current system as regressive, arguing that late fees paid by borrowers who carry balances help subsidize rewards for customers who pay on time and often have higher incomes.
If enacted, the Credit Card Fairness Act would codify the CFPB’s $8 cap, overriding the stalled regulation and placing firm limits on late fees nationwide. The proposal now heads to Congress, where supporters say it will test lawmakers’ willingness to rein in bank practices that critics view as predatory while lenders defend as part of the economics of consumer credit.
For the latest news on everything happening in Chester County and the surrounding area, be sure to follow MyChesCo on Google News and MSN.