CFPB Credit Card Late Fee Rule Repeal Approved by House Panel

Lawmakers advanced legislation to block the Consumer Financial Protection Bureau’s rule capping credit card late fees at $8, setting up a vote in the US House of Representatives.

The House Financial Services Committee voted 28-22 along party lines Wednesday to approve a measure (H. J. Res. 122) from Rep. Andy Barr (R-Ky.) that would repeal the CFPB’s rule under the Congressional Review Act and bar the agency from introducing a similar proposal.

Sen. Tim Scott (R-S.C.), the ranking member of the Senate Banking Committee, introduced identical repeal legislation (S. J. Res. 70) on April 8 with 13 co-sponsors, all Republicans. The Democratic-controlled Senate is unlikely to approve any measure overturning the CFPB’s credit card late fee caps, especially given President Joe Biden’s strong support for the rule, though several Democrats have backed previous legislation seeking to block regulations from the CFPB and other agencies.

The CFPB estimates that around 45 million Americans are charged credit card late fees each year, and that the rule will save them up to $220 per year. On the flip side, banks stand to lose about $11 billion of the $14 billion in credit card late fees they generate annually, according to Bloomberg Intelligence.

Biden has highlighted the late-fee rule as part of his efforts to curb so-called junk fees. He is likely to veto any repeal that reaches his desk. The Congressional Review Act sets up a fast-track process for both chambers to pass a disapproval resolution with only a majority, avoiding a filibuster in the Senate.

In addition to challenges in Congress, the rule capping late fees also faces a lawsuit from the US Chamber of Commerce and other industry groups. The Fifth Circuit is now weighing whether to suspend the rule before it takes effect May 14.

Currently, banks can charge $30 for a first missed payment and $41 for each additional missed payment for the subsequent six months while being immune to lawsuits for excessive fees under rules finalized by the Federal Reserve in 2010, the CFPB said.

Only credit card issuers with more than 1 million open accounts, such as JPMorgan Chase & Co., Capital One Financial Corp., and Bank of America Corp., are subject to the CFPB’s rule.

The rule also eliminates an automatic annual inflation adjustment for credit card late fees. Major credit card issuers were able to charge $32 on average for late fees in 2022, up from $23 in 2010, partly as a result of the yearly increases, according to the CFPB.