Biden Caps Credit Card Fees At $8 To Fight ‘Junk Fees’

President Joe Biden issued federal regulations to cap credit card late fees at $8 to eliminate junk fees. 

The new rule, issued on March 5, is estimated to save families over $10 billion annually by cutting fees down from an average of $32. According to the Consumer Financial Protection Bureau, regulations apply to large credit card companies hosting over 1 million accounts, representing 95% of total outstanding credit card debt. 

With the proposal first introduced in February 2023, the Biden administration is pushing forth action to help American families struggling with rising living costs. 

During a meeting with his Competition Council, Biden estimated credit card companies have gained five times more in late fees than in costs to recoup the late payment. He said the practice violates federal law by preventing credit card companies from charging late fees exceeding the cost to collect payments. “They’re padding their profit margins and charging hard-working Americans,” Biden said.

“This action will collectively save families $10 billion in credit card late fees every year.”

CFPB is supporting this initiative with a proposed rule to curb rising overdraft fees, closing loopholes that exempted overdraft lending services from actions in the Truth in Lending Act of 1968. Even though banks will still be able to charge limited overdraft fees, banks won’t be able to exceed banks’ losses under the regulation. 

The CFPB is still discussing the finalized amount, but they are exploring overdraft fees being limited to $3, $6, $7, or $14, plus $.50 per transaction.

Over 45 million people are being charged late fees on cards every year, according to the CFPB. However, they could save an average of $220 per year. Sen. Elizabeth Warren (D-MA) applauded the move on social media.

“This action by President Biden will save Americans $10 BILLION a year. These junk fees are designed to boost Wall Street profits at the expense of working people,” she tweeted. 

“@POTUS and @chopracfpb are saying ENOUGH. This is the government working for the people, not the big banks.”

However, banking industry executives don’t like the change. 

Rob Nichols, president and CEO of the American Bankers Association, is accusing the CFPB of “choosing to put politics over sound public policy,” touching on the rule’s timing before Biden’s State of the Union address set for March 7.

“Today’s flawed final rule will not only reduce competition and increase the cost of credit but will also result in more late payments, higher debt, lower credit scores, and reduced credit access for those who need it most,” Nichols said. 

Cutting “junk fees” for consumers has been key to Biden’s economic agenda. The Council of Economic Advisers estimates the actions taken by the administration — targeting the banking, ticketing, airline, and other industries −- will reduce more than $20 billion in junk fees annually.

“The American people are tired of being played for suckers,” Biden said.

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