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May 4, 2023

CFPB Proposal Would Reduce Credit Card Penalty Fees That Gouge Consumers

WASHINGTON, D.C.—Legal Director and Securities Specialist Stephen Hall issued the following statement on the filing of Better Markets’ Comment Letter to the Consumer Financial Protection Bureau (CFPB) in response to the agency’s proposed rule to reduce credit card penalty fees:

“This rule will dramatically limit the credit card penalty fees that companies have used for years to gouge consumers and pump up revenues. These penalties, primarily in the form of late fees, are now on the scale of $14 billion annually, averaging between $35 and $41 dollars per fee.  Those dollar amounts may seem modest to some but they actually represent a real financial hardship to the countless Americans struggling to make ends meet.  And these fees are contrary to what Congress intended, as they far exceed the actual costs that consumer infractions actually impose on credit card issuers and they are divorced from the amounts that would be necessary to deter recurrent cardholder omissions.

“In 2009, Congress mandated that these fees be reasonable and proportional to the cardholders’ late payments or other omissions.  And it established a number of factors that must guide the amount of those fees, including the costs incurred by the card issuer from such omissions and the amounts appropriate for deterring future lapses by the cardholder.  Yet when the Federal Reserve established its safe harbor for permissible credit card fees over ten years ago, it essentially relied on the industry’s customary charges. And those charges were determined not based on actual costs and deterrence considerations but on other factors, including the credit card companies’ desire to maintain or increase overall revenue.

“The CFPB is now taking appropriate action to protect consumers from these grossly inflated fees.  Specifically, the proposal would dramatically reduce the safe harbor penalty fee from $35 to $8 and the fee for subsequent violations from $41 to $8.  It would also eliminate the annual inflation adjustments for the safe harbor amounts, since inflation does not accurately reflect changes in the actual costs of collection. The bottom line is that we strongly support the proposal, as it will afford relief to beleaguered consumers and better align the credit card penalty fees under the safe harbor with the legal standards that Congress established.”

Read the full comment letter here.


Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit


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