CFPB Finds Credit Card Companies Charged $12 Billion in Late Fee Penalties in 2020
The Consumer Financial Protection Bureau (CFPB) has issued a report showing that credit card issuers charged $12 billion in late fees in 2020. Late fee penalties are charged in addition to interest when a cardholder does not make the minimum payment by the due date.
Some Findings of the CFPB’s Report Included:
Many major issuers charge the maximum late fee allowed under the immunity provisions set by the Federal Reserve Board of Governors in 2010. Eighteen of the top 20 issuers set late fees at or near the established maximum level.
Subprime cards and private label cards are particularly susceptible to late fee charges. For example, the average deep subprime account gets charged $138 in late fees per year, and deep subprime accounts are more likely than super-prime accounts to carry smaller balances. As a result, deep subprime cardholders pay late fees that represent a higher percentage of their balances (11% compared to 0.8% for super-prime accounts). These late fees are in addition to accrued interest charges. For private label cards, late fees comprised the overwhelming majority—91%—of all consumer fees and 25% of total interest and fees (compared to 45% and 7%, respectively, for general purpose credit cards).
CLICK HERE to read the CFPB’s full report.