The federal Consumer Financial Protection Bureau, established in 2011 in the wake of the 2008 U.S. economic crisis, finalized a new rule that it says will save about 45 million consumers aa collective $10 billion a year.
The new rule caps late payments fees large credit card companies can charge at $8, down from an average of $32.
The rule applies to credit card issuers with more than 1 million open accounts and is set to take effect around June 1.
The CFPB says the new rule closes a loophole in the CARD Act passed by Congress in 2010, which limited late fees to the actual cost of collection.
"For over a decade, credit card giants have been exploiting a loophole to harvest billions of dollars in junk fees from American consumers," CFPB Director Rohit Chopra said in a press release. "Today's rule ends the era of big credit card companies hiding behind the excuse of inflation when they hike fees on borrowers and boost their own bottom lines.
The CFPB has also proposed capping fees banks can charge for overdrafts.
Fees have become a big income source for major banks and big credit card issuers, so don't expect them to take any of this lying down.
We expect the fight to make it to the U.S. Supreme Court.
We suspect many consumers -- especially those who a often late on payments -- will cheer the new rules. But there's a catch. Don't be surprised if your already-high credit card interest rate creeps up a few more percentage points, even if you never make a late payment. You an bet he profits from these fees will be made up somewhere and responsible borrowers will be footing the bill.