A recent CFPB report claims that most credit card companies charge the maximum late fee allowed under provisions set by the Federal Reserve Board of Governors (FRB) in 2010. These late fees are charged in addition to interest and are, according to the CFPB, a core part of corporate profit models. The report continues the CFPB’s recent focus on additional charges imposed on consumers of financial services.
A 2010 FRB rule requires sanctions to be “reasonable and proportionate”, but specifically allows credit card issuers to set late fees up to a specified level, subject to an annual inflation adjustment. These limits have recently been raised to $ 30 for the first late payment and $ 41 for a subsequent late payment within 6 billing cycles.
The CFPB report also made several further findings. First, it reports that subprime cards and private label cards are more likely to charge penalties. Second, the CFPB claims that the amount of late fees decreased when stimulus checks arrived in 2020 and 2021, which the CFPB says suggests that late fees serve as a penalty for households living pay-to-check rather than a incentive to pay on time. And third, the CFPB found that consumers in low-income areas, areas with a high proportion of black Americans, and areas with lower economic mobility all paid higher delay fees per capita. per capita than consumers in other areas.