CFPB Fights Excessive Credit Card Late Fees

Advertiser Disclosure

Banks and lenders are fighting an effort by the Consumer Financial Protection Bureau (CFPB) to stop a roughly 9% hike next year in credit card late fees from taking effect. The late fee hike is pegged to inflation. Still, the CFPB is questioning whether these fees increase is “reasonable and proportional.”

CFPB Seeks to Tackle Excessive Credit Card Late Fees

Under the “safe harbor” provision,  a provision set by the Federal Reserve in 2010. banks can raise late fees due to inflation without any cost-benefit analysis as long as the fees being charged are “reasonable and proportional.” To receive the safe harbor, credit card issuers can charge $30 for the first late payment and $41 for subsequent late payments within six billing cycles

The concept of late fees rising with inflation has been a non-issue for years, thanks to historically-low interest. However, soaring inflation is forcing the CFPB to tackle the problematic loophole. The Consumer Price Index (CPI) has risen to 9% in 2022, as post-Covid supply logjams and war in Ukraine are hammering global economies. The CPI measures the average price change over time in a fixed market basket of goods and services.

Are Late Fees Excessive?

The CFPB asked for information on the Federal Reserve Board of Governors’ 2010 immunity provision for “excessive late fees” that allows credit card companies to escape enforcement scrutiny in an Advance Notice of Proposed Rulemaking. The CFPB is trying to determine if late payment fees are “reasonable and proportional.” It’s also looking for information regarding card issuers’ revenue and expenses, the deterrent result of these fees, and how they add to the credit card companies’ profitability.

“Credit card late fees are big revenue generators for card issuers,” CFPB Director Rohit Chopra told Fox Business. “We want to know how the card issuers determine these fees and whether existing rules are undermining the reforms enacted by Congress over a decade ago. This effort is particularly timely since current rules might give companies the incentive to impose big hikes based on inflation.”

Related Article: Americans Adding Credit Card Debt to Avoid Inflation

Featured image by anncapictures/PixaBay

Editorial Disclosure – The opinions expressed on's reviews, articles, and all other content on or relating to the website are solely those of the content’s author(s). These opinions do not reflect those of any card issuer or financial institution, and editorial content on our site has not been reviewed or approved by these entities unless noted otherwise. Further, lists credit card offers that are frequently updated with information believed to be accurate to the best of our team's knowledge. However, please review the information provided directly by the credit card issuer or related financial institution for full details.

About: Cory Santos
Cory Santos

Cory is the senior credit card editor at BestCards, specializing in everything credit card-related. He’s worked extensively with credit cards and other personal finance topics, including nearly five years at BestCards. Cory’s extensive knowledge is an essential part of the BestCards experience, helping readers to live their best financial lives with up-to-date insights and comprehensive coverage of all facets of the credit card space, including market trends, rewards guides, credit advice, and comprehensive credit card reviews.

Advertiser Disclosure

BestCards is an independent, Florida-based credit card comparison platform. Many of the card offers that appear on this site are from companies from which BestCards receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). BestCards does not include all card companies or all card offers available in the marketplace.