WASHINGTON—Calling it “deeply flawed,” credit unions are pushing back on a new Credit Card Fairness Act, which has been introduced by three senators who want to put into statute the Consumer Financial Protection Bureau’s “popular” $8 cap on credit card late fees.
The legislation, introduced by Sens. Cory Booker (D-NJ), John Fetterman (D-PA), and Tammy Baldwin (D-WI), is just the latest in Washington where the Credit Card Competition Act has made its return and President Trump has called for a 10% cap on card APRs.
“Consumers currently pay $14 billion per year in credit card late fees, which pads the profits of the biggest banks,” the senators said in introducing the legislation. “The standard $30 to $41 late fee is up to five times higher than the cost for banks of collecting late payments, allowing banks to profit from customers who are struggling to make ends meet. The Consumer Financial Protection Bureau previously enacted a rule that capped these fees at $8, which was stalled in litigation brought by the big banks. This legislation would codify the $8 cap in law.”
“American consumers shouldn’t be hit with predatory late fees that are three to five times higher than the actual cost of collection,” said Booker in a statement. “This legislation keeps money in the pockets of working families by putting a clear cap on credit card late fees and cracking down on banks that make billions of dollars of profit each year on the backs of their customers.”
‘Deeply Flawed’
“Credit unions are steadfastly committed to supporting affordability and helping American families through tough times,” America’s Credit Unions CEO Scott Simpsono said in a statement. “They structure their programs and costs to meet that mission and have for nearly a century. Most credit unions already charge significantly lower late fees than large banks, but the policy itself was deeply flawed, and it remains flawed today.
“Hard price caps are a blunt instrument, and they rarely work the way people hope. A rigid $8 cap does not come close to covering the real costs of servicing accounts and managing risk,” Simpson continued. “When those costs are ignored, they do not disappear. They get shifted onto consumers who pay their bills on time through higher fees, fewer card options, or reduced benefits, while access to credit tightens for those who need it most. We raised these concerns when the CFPB proposed its rule, and the same problems exist here.
“If we want to help consumers long-term, we should focus on policies that expand access to fair, affordable credit, not ones that risk shutting people out when they need it most,” Simpson said. “The courts recognized this fact when it vacated CFPB’s misguided rule on credit card late fees. Unfortunately, the Credit Card Fairness Act is attempting to repeat that mistake.”
Fetterman: ‘Big Banks Profiteering’
“Big banks profiteering off people by charging $41 for a single late credit card payment is absolutely wrong,” Fetterman said in a statement. “At a time when people are struggling to get by these late fees are only doing more harm. This legislation will protect hardworking Americans from predatory fees, and I’ll work with anyone to get this over the finish line.”
Baldwin: ‘Give Families a Little Breathing Room’
“As costs continue to skyrocket under this administration — from groceries, to housing, to health care — Wisconsin families are already stretched thin,” Baldwin said in a statement. “The last thing they need is big banks and credit card companies gouging them with credit card late fees that make it harder to stay afloat, let alone get ahead,” said Senator Baldwin. “Our bill will crack down on big banks, cap late fees at $8, and give families a little breathing room.”
Groups Endorse Bill
While credit unions oppose the bill, the senators said the Credit Card Fairness Act is endorsed by Americans for Financial Reform, the Consumer Federation of America, Groundwork Collaborative, the National Consumer Law Center (on behalf of its low-income clients), Public Citizen, and Protect Borrowers.
To read a one-pager on the bill, click here.
