Credit card late fees should be capped at $8, Senate Majority Leader Chuck Schumer urged Sunday, after the U.S. Supreme Court found the federal Consumer Finance Protection Bureau’s funding to be constitutional in the face of conservative attacks.
“Junk fees, like late fees on credit cards, are meant to pile up and get so unaffordable that the customer simply drowns in debt — it’s unfair and has got to end,” the New York Dem said in a statement. “The credit card companies are making billions in fees while consumers try and pay all the fees along the way.”
While the average late fee in New York is $21, that can get compounded based on one’s balance, wreaking havoc with a consumer’s debt load, Schumer said. He noted that consumers spent $15 billion on late fees in 2022 alone. Nationally, the typical fee tops $30, the CFPB said earlier this year.
“The goal of a $8 late fee cap is not only alive, but it is likely, and I want it enacted ASAP,” Schumer said. “A cap would be a cushion for many people who don’t skirt their bills but have found that the fees just kill them.”
Courtesy of the Office of Senator Charles Schumer
Sen. Chuck Schumer at a press conference against high credit card fees on Sunday. (Courtesy of the Office of Senator Charles Schumer)
The CFPB instituted the $8 cap in March and scheduled it to take effect last Tuesday. But before that could happen, a federal judge in Texas upheld a legal challenge by the American Bankers Association and the U.S. Chamber of Commerce and quashed the rule, pending the outcome of the CFPB case before the Supreme Court, as CBS News reported.
The CFPB, created in the wake of the 2008 financial crisis to regulate mortgages, car loans and other consumer finance issues, gets its funding from the Federal Reserve instead of the annual budget that passes through Congress. A group of payday lenders challenged that practice, alleging that the funding mechanism violated the appropriations clause of the Constitution by skirting congressional supervision.
On Thursday, seven of nine Supreme Court justices reversed the ruling — with justices Samuel Alito and Neil Gorsuch dissenting — finding that the CFPB’s funding mechanism does not violate the Constitution.
That paved the way for the credit card late-fee cap, Schumer said.
“I have a long history tussling with the credit card companies when they step over the line and try and squeeze the consumer for all they got,” he said, “and that is why I am so adamant about getting this late fee cap enacted: Because it won’t hurt the credit card companies, and it will help consumers.”
With News Wire Services
