Senate Bill Would Cap Credit Card Late Fees at $8

Pennsylvania Senator John Fetterman has his eye on credit card late fees and wants them capped at $8. Two other Democratic senators, Cory Booker (D-NJ), and Tammy Baldwin (D-WI) joined Fetterman in introducing the Credit Card Fairness Act that would substantially lower credit card late fees. 

“Big banks profiteering off people by charging $41 for a single late credit card payment is absolutely wrong,” Fetterman said in a press release. “At a time when people are struggling to get by, these late fees are only doing more harm. This legislation will protect hardworking Americans from predatory fees, and I’ll work with anyone to get this over the finish line.”

This new legislation would put into law the $8 late fee cap recommended by the Consumer Financial Protection Bureau in 2024.

In March 2024, the Consumer Financial Protection Bureau made a rule to ban excessive late fees by lowering the typical fee from $32 to $8. At the time, the CFPB estimated that American credit card consumers would save more than $10 billion in late fees each year. 

This amounts to an average savings of $220 per year for more than 45 million Americans who are charged credit card late fees, according to the CFPB. 

“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,” said then-CFPB Director Rohit Chopra.

Litigation by banks prevented this cap from moving forward. And after taking office, President Trump’s CFPB Director, Russ Vought, stopped defending the CFPB rule in court. But new proposed legislation could establish a rate cap if enough votes are found first in the U.S. Senate and then the U.S. House. 

Several consumer groups, including Americans for Financial Reform and Consumer Federation of America, spoke out in favor of the bill.

“Excessive credit card late fees bulk up profits for big banks while eating into already strained household budgets,” said Ericka Taylor, Co-Executive Director of Americans for Financial Reform. “This legislation would cap credit card late fees and make life a little more affordable.”

Adam Rust, Director of Financial Services for the Consumer Federation of America, said penalty fees should not be profit centers for banks. 

“Families shouldn’t have to choose between paying an exorbitant late fee or meeting their basic needs. The Credit Card Fairness Act sets a reasonable cap on credit card late fees, restoring a standard of fairness and affordability to the cost of consumer credit,” Rust said. 

A new bill introduced in the U.S. Senate would cap credit card late fees to $8. Late fees are as high as $41 but are typically about $32. Slashing the late fees would be a big gain for consumers and a loss of profits for card issuers. 

If a 10% rate cap were to be adopted, banks and issuers would likely look to increasing fees to make the math work. But this potential cap on late fees could complicate that strategy.