Consumer Reports survey highlights reasons consumers make late payments and shows strong public support for CFPB’s proposed rules to rein in excessive late fees
WASHINGTON, D.C. – A report issued by the Consumer Financial Protection Bureau today found that credit card companies charged a record $105 billion in interest and more than $25 billion in fees in 2022. Late fees were the most common fee charged by credit card companies, totaling $14.5 billion last year. The report comes as the CFPB is expected to finalize a proposed rule to rein in unfair credit card late fees soon and a new survey by Consumer Reports shows strong public support for the proposal.
“Credit card companies pad their profits by raking in billions of dollars in late fees that create a heavy financial burden on low income families and communities of color,” said Chuck Bell, advocacy program director for Consumer Reports. “Credit card late fees can be charged even if the payment is one hour late or isn’t credited over a weekend. As more Americans face difficult financial decisions between paying a credit card bill or paying for groceries, gas for their car, or housing, the CFPB’s proposed reforms would go a long way toward helping many people balance their household budgets.”
One in five adult Americans – an estimated 52 million people – paid a credit card late fee in the last 12 months, according to a September 2023 Consumer Reports nationally representative survey of 2,089 U.S. adults. When asked the reason or reasons they were late, the most common reason these people gave is that they thought they had already paid (27%). However, the next-most common responses have to do with having other payments to make. For instance, 19 percent said it was because they needed to pay for other essentials first, such as rent or utilities. Almost as many (17 percent) said they had an emergency that resulted in their inability to pay, and 14 percent prioritized paying other debt. Nine percent said they simply didn’t have the money.
Credit card late fees average $30 for the first offense and $41for subsequent ones. Under the CFPB’s proposed rule, credit card companies could still charge late fees, but the fee would have to be more in line with the true costs. The rule would cap fee fees at no more than $8 or, at the credit card company’s discretion, to 25 percent of the minimum balance due, and ban companies from increasing fees by the rate of inflation, as they have been doing.
In CR’s survey, 82 percent of Americans said they supported lowering the maximum late fee. The proposed rule would also require credit card companies to send consumers a reminder a few days before a payment is due – something 84 percent of Americans in CR’s survey said they support – and provide a 15-day grace period for late payments before a fee is charged. Sixty-eight percent of Americans in CR’s survey said they thought a 15-day grace period was more fair than the current system.
For more information on why high credit card late fees are unfair and tips for consumers to avoid late fees, see CR’s recent report.
Michael McCauley, email@example.com