Banks expect the federal government to crack down on credit card late fees following a highly critical report from the Consumer Financial Protection Bureau highlighting the effects of the penalties on households.
The report, published this past week, emphasized that the $12 billion in late fees charged in 2020 hurt millions of families, particularly those with subprime accounts. The watchdog agency said it also expects many major card issuers to further increase the fees, based on inflation.
The report found major banks weren’t breaking the law in issuing late fees and were adhering to the safe harbor limits, although it found that the average cost of late fees being charged was nearing those thresholds. “Markets work best when companies compete on price and service rather than relying on back-end fees that obscure the true cost,” Chopra said. “Given their current practices, we expect that credit card issuers will hike fees, based on inflation, as limits continue to rise.”
“The fact that late fee charges for credit card issuers fell during the same period suggests that late fees are a penalty on households living paycheck-to-paycheck rather than a meaningful incentive to make on-time payments,” the bureau said in a news release.
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