Washington, D.C. — As the CFPB finalizes a rule to close a decade-old regulatory loophole that has allowed credit card issuers to extract billions of dollars in excessive late fees from working Americans, the American Economic Liberties Project today released a new report, “Closing the Late Fee Loophole: How the CFPB is Combating Credit Card Junk Fees.”

“Once again, the CFPB is standing up to the credit card companies and big banks to save working Americans billions,” said Shahid Naeem, Senior Policy Analyst at the American Economic Liberties Project. “For more than a decade, the credit card industry has been allowed to make a mockery of the 2009 Card Act, which set rules to keep the industry fair and prevent junk fees like this from becoming a profitable gold mine. Closing the safe harbor loophole is critical to stop the credit card industry from charging Americans excessive late fees that are five times the costs of collecting late payments. Let’s not forget: the burden of these fees are disproportionately borne by those that can least afford them, including low-income families and people of color.”

As credit card debt balloons across the country, the CFPB’s new rule would save working families $9 billion a year by drastically lowering fees charged for late credit card payments to $8, down from as high as $41. The CFPB rule returns the charges to a level reflecting the 2009 Card Act’s mandate that they be “reasonable and proportional” to actual business costs.

Late fees are now the most significant credit card fee Americans face in both dollar amount and frequency, costing Americans $14.5 billion in 2022 alone. These junk fees disproportionately affect low-income Americans—in 2019, credit card accounts with credit scores 580 or below paid over 10x more on average in late fees than accounts with scores 720 or higher, and just 12% of credit card accounts paid 42% of total late fees charged. The CFPB has found that these fees effectively punish American families for living paycheck-to-paycheck.

The brief also debunks the spin campaign from card issuers and their lobbying groups, who have been out in force on Capitol Hill trying to kneecap the CFPB’s efforts to promote fair markets and protect consumers. While the credit card industry claims that sky-high late fees promote timely payments and a “safer” market, evidence shows these fees more often stem from financial strain than from insufficient deterrence. The industry’s claim that the current late fee safe harbor of $30 to $41 is reasonable and proportional is similarly dubious—when pressed by Congress and the CFPB, credit card companies declined to “show their math” and provide data on the actual cost of collecting late payments.

Read “Closing the Late Fee Loophole: How the CFPB Is Combating Credit Card Junk Fees,” for more.

Learn more about Economic Liberties here.

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The American Economic Liberties Project works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. Economic Liberties believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; foreign trade arrangements support domestic security and democracy; and wealth is broadly distributed to support equitable political power.