Welcome to Consumer Reports Advocacy

For 85 years CR has worked for laws and policies that put consumers first. Learn more about CR’s work with policymakers, companies, and consumers to help build a fair and just marketplace at TrustCR.org

Consumer Reports decries Texas District Court’s decision preventing new limits on excessive credit card late fees from going into effect

Court grants banks’ motion to temporarily block CFPB’s new rules on costly late fees

The U.S. District Court for the Northern District of Texas granted a motion today sought by the banking industry in Chamber of Commerce vs. CFPB that temporarily blocks new rules limiting how much credit card companies can charge consumers when payments are made late. The CFPB estimates that the new limits, which were set to go into effect on May 14, would save $10 billion per year for consumers, or about $220 annually for those who are charged late fees.

“It is disappointing that the court has granted this last-ditch effort by the banks to prevent these critical limits on credit card late fees from going into effect next week,” said Chuck Bell, advocacy program director for Consumer Reports. “Credit card companies have been bilking consumers out of billions of dollars in excessive late fees for far too long,”

Bell continued, “The CFPB’s new limits are reasonable and proportional to the costs banks incur for processing late payments just as Congress intended and will help ensure consumers are treated fairly. We remain hopefully that ultimately these new limits will be upheld and that consumers will finally get the relief they deserve.”

One in five Americans – an estimated 52 million people – said they had paid a credit card late fee in the previous 12 months, according to a September 2023 CR nationally representative survey of 2,089 adults. In CR’s survey, 82 percent of Americans said they supported lowering the maximum late fee.

The financial burden of late fees falls most heavily on people living paycheck-to-paycheck, low- and moderate-income consumers, and people of color. CFPB research has found that people with low incomes pay proportionately bigger fees because they tend to have smaller credit card balances.

The CFPB’s new rule applies to the largest credit card issuers (those with more than 1 million accounts) and lowers the typical late fee to $8 so that it is more in line with the true costs of the credit card issuer. Banks subject to the rule can charge a higher late fee if they can prove that is necessary to cover their actual collection costs. The CFPB’s rule also bans companies from increasing fees by the rate of inflation, as banks have been doing.

The CFPB’s rule is in keeping with the Credit Card Accountability and Disclosure Act of 2009 (CARD Act), which required that credit card late fees should be “reasonable and proportional” to the costs incurred by issuers to handle late payments. The CFPB estimates that the income generated by the largest issuers from late fees is approximately five times greater than the collection costs that the companies incur for late payments. As a result, credit card late fees average $30 for the first offense and $41 for subsequent ones.

Michael McCauley, michael.mccauley@consumer.org, 415-902-9537