A federal judge recently ruled that the regulation capping credit card late fees at $8 has been struck down. This change means credit card companies can once again reset late fees, and the ruling aligns with the Trump administration’s position, reversing a Biden-era policy.
- The restriction, pushed by the Biden administration, was aimed at cracking down on various “junk fees,” including credit card late fees and hidden airline ticket fees.
- The previous $8 cap applied to card issuers with more than 1 million open accounts, though the limit could be waived if they could show that their actual late-payment costs were higher.
- As a result of this ruling, credit card issuers can again charge fees that are reasonable and proportional to the late payment, rather than being limited to a low fixed amount.
The Consumer Financial Protection Bureau (CFPB) took the opposite view on the rule’s legality during the Trump administration, arguing that higher fees help deter late payments. In the case, Trump-appointed federal judge Mark Pittman said the original rule conflicted with the 2009 Credit CARD Act because it did not allow credit card companies to charge reasonable fees for late payments.
The change has drawn broad attention, with many people debating the cost that credit card companies bear because of irresponsible cardholders. Many are asking why people who pay on time should end up covering additional costs caused by those who do not. The ruling was welcomed by the business community, which argued that the CFPB’s original rule could lead to more late payments, lower credit scores, higher interest rates, and other negative consequences. Notably, Congress recently passed related legislation eliminating the $5 cap on bank overdraft fees, and Trump is expected to sign those bills today. As a result, many are watching whether these changes could have a negative impact on lower-income consumers who rely on overdrafts.
