Bill Would Renew Caps On Credit Card Late Fees

A group of Senate Democrats has introduced a bill to write President Biden’s now-vacated cap on most credit card late fees into law, limiting them to about $8 for large issuers and tying future changes to inflation.​

What the bill does

• Revives the Biden-era Consumer Financial Protection Bureau (CFPB) rule that had cut typical late fees from about $30$–$41$ dollars down to $8$ dollars for major card issuers before it was struck down in court.​

• Sets an $8$-dollar “safe harbor” maximum late fee for large issuers (generally those with at least 1 million accounts), with only inflation-based adjustments allowed going forward.​

• Directs that legal challenges go to the D.C. Circuit Court, aiming to avoid the Texas-based Fifth Circuit that had been more hostile to the CFPB rule.​

Why this is happening now

• The Biden CFPB’s $8$-dollar cap, part of a broader crackdown on “junk fees,” was finalized in 2024 but was first blocked and then vacated after lawsuits by banks and the U.S. Chamber of Commerce, which argued the bureau exceeded its authority under the CARD Act and administrative law.​

• In 2025, the CFPB agreed in court that the cap conflicted with the requirement that penalty fees be “reasonable and proportional,” and the rule was formally scrapped, restoring much higher typical late fees.​

Who is behind the bill

• The measure, commonly described as the Credit Card Fairness Act, is sponsored by Democratic Senators John Fetterman of Pennsylvania, Cory Booker of New Jersey, and Tammy Baldwin of Wisconsin.​

• Consumer groups backing the bill argue that current late fees often far exceed actual collection costs and disproportionately hit financially stressed households.​

What it means for consumers

• If passed, most people with cards from large banks would face a maximum late fee of around $8$dollars per missed payment instead of $30$–$40+$ dollars, which supporters say could save cardholders billions of dollars a year in aggregate.​

• Banks and business groups warn that such caps could lead to tighter credit, higher interest rates, or reduced rewards as issuers look to replace lost fee revenue.​

How this fits into current politics

• The proposal continues Biden-era efforts to reduce “junk fees” even though the original CFPB rule was dismantled under the current Trump administration and by the courts.​

• It also lands alongside separate debates about capping credit card interest rates, including Trump’s recent call for a one-year 10% ceiling on card APRs, which is distinct from this late-fee bill.​

Banks and their trade groups argue that an $8 late-fee cap is too low to deter missed payments, violates the law’s “reasonable and proportional” standard, and would ultimately hurt the very consumers it is meant to help.​

Core legal arguments

• The cap conflicts with the CARD Act, which requires penalty fees to be “reasonable and proportional” to the violation; banks say a flat $8$ dollars cannot cover actual costs or deterrence, especially for repeat late payers.​

• Industry groups and the U.S. Chamber of Commerce argue the CFPB exceeded its statutory authority and violated the Administrative Procedure Act by effectively prohibiting higher, risk-based late fees without sufficient justification.​

Consumer impact claims

• Trade groups say weaker deterrence would lead to more late payments, lower credit scores, and higher overall card losses.​

• They argue that if late-fee revenue falls, issuers will respond with higher interest rates, annual fees, or reduced rewards, shifting costs onto borrowers who pay on time and “punishing” responsible customers.​

Risk and pricing concerns

• Banks contend that an $8$-dollar ceiling does not reflect the true operational and risk-management costs of delinquent accounts (collections staff, systems, charge‑off risk), so pricing cannot match risk across different customers.​

• Industry briefs claim the cap would force issuers to tighten credit standards, making it harder for higher-risk or lower‑income consumers to qualify for cards at all.​

Deterrence and behavior

• A repeated theme is that late fees must be high enough to meaningfully deter missed payments; banks say cutting them from roughly $30$–$40$ dollars to $8$ dollars “undermines vital incentives” for consumers to pay on time.​

• They cite “strong empirical evidence” (not always publicly disclosed) that such a low cap would “significantly increase” the incidence of late payments across the customer base.​