Biden Finalizing Rule to Cap Credit Card Late Fees at $8
(Bloomberg) -- President Joe Biden’s administration is announcing a final rule curtailing credit card late fees, one of a series of steps to try and drive down everyday costs for households that are weighing on his approval rating as he seeks reelection.
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The Consumer Financial Protection Bureau estimates its move to slash credit card late fees would save an average of $220 per year for 45 million people who incur such penalties.
“You care a whole lot when you’re being played for a sucker, no matter how much money you have,” Biden said Tuesday. “We’re going to do everything we can to keep lowering costs for hardworking families.”
The measure is one of several announced at a Tuesday meeting of the White House Competition Council, where Biden spoke. The administration also said it finalized a rule intended to help farmers and ranchers against deceptive practices by meat processors, and a new effort by the Justice Department and the Federal Trade Commission to fight deceptive pricing practices.
“Some corporations are tacking on extra fees, hiding costs and sometimes even breaking the law,” National Economic Council Director Lael Brainard said Monday on a call with reporters. “The president is committed to lowering costs for hardworking Americans who pay too much for groceries, banking, airfare and basic utilities.”
Biden launched his competition council as his administration struggled to contain inflationary pressures, which affected his approval rating and ate away at the monthly bottom line for voters. Biden has built much of his 2024 reelection pitch around efforts to lower everyday costs for middle-class and working-class families, and the bundle of announcements Tuesday will be touched on in Thursday’s State of the Union speech.
Late Fees
Currently, firms can charge $30 for a first missed payment, and up to $41 if a consumer misses a second payment within six months. The new rule, first proposed in February 2023, would now cap late fees at $8, unless a company can prove a higher fee is necessary to cover payment collection costs.
If implemented as proposed, Bloomberg Intelligence analysis predicts credit card issuers could lose as much as $9 billion of their annual $12 billion in late fees.
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The rule also proposes doing away with an automatic adjustment of fees for inflation, and instead monitoring market conditions and adjusting as necessary.
“Late fees have gotten out of control, due to a loophole” that “allowed large credit card companies to sidestep a federal ban on unreasonable fees,” said CFPB Director Rohit Chopra.
The rule will take effect 60 days after it’s formally published in the Federal Register, an administration official said, speaking to reporters on condition of anonymity to discuss the proposal’s details.
Trade groups representing the biggest Wall Street banks decried the rule almost immediately after it was first announced last year, and are widely expected to sue to block it. The administration made changes to the rule in response to industry feedback and does not believe a legal challenge is automatic, one official said.
“We will closely review this final rule and consider all options to fight the harmful consumer policy coming out of Director Chopra’s CFPB. This rule should not be allowed to go into effect,” said Rob Nichols, president and chief executive officer of the American Bankers Association.
Bulk Bills
The Federal Communications Commission will move to ban so-called bulk billing, which sees everyone in an apartment building paying for a broadband service even if they didn’t order it. The cable industry argues that bulk billing contracts with building owners lets providers offer residents significantly discounted rates. The FCC examined the practice in 2022 and didn’t act to bar it.
The task force also announced new rules that will prohibit US meatpackers from retaliating against farmers for engaging in business with competing processing companies or participating in cooperatives amid other protections.
Agriculture Secretary Tom Vilsack said producers and growers have become “increasingly vulnerable” to practices that disadvantage them and “undermine market integrity in the livestock and poultry industry.”
The meat industry is highly concentrated in the US, with the four largest companies making up for more than half of the nation’s poultry processing, according to US Department of Agriculture data.
--With assistance from Gerson Freitas Jr., Leah Nylen and Todd Shields.
(Updates to add Biden comments in third paragraph, ABA statement in 13th paragraph)
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