CFPB Implements $8 Cap on Credit Card Late Fees

The Consumer Financial Protection Bureau (CFPB) has announced a groundbreaking new rule that will have a significant impact on credit card users across the country. The rule, which caps late fees at $8 per incident, is expected to save more than 45 million cardholders an average of $220 annually by slashing the typical late fee of around $32. This game-changing regulation comes following a comprehensive review of market data related to the 2009 Card Act, which previously allowed card issuers to levy increasingly exorbitant late fees on customers. According to CFPB Director Rohit Chopra, credit card companies have been exploiting a legal loophole to impose billions in what he calls "junk fees" on consumers. The new rule aims to put an end to this predatory practice once and for all. In 2022 alone, late fees in the credit card industry surpassed a staggering $14 billion, with individuals with lower credit scores bearing the brunt by shelling out an average of $138 annually in late fees per card. This rule will apply to card issuers with at least one million open accounts and will put a stop to automatic inflation adjustments on late fees. While consumer advocates are hailing this move as a major win for cardholders, an industry group has criticized the rule, warning of potential repercussions such as higher interest rates and reduced credit availability for users. Additionally, Republican Senator Tim Scott of South Carolina has expressed opposition, indicating that he plans to utilize the Congressional Review Act to challenge the implementation of the late fee cap. Despite the backlash, the new rule is set to take effect 60 days after its publication in the Federal Register. This regulatory change is poised to bring about substantial relief to millions of Americans grappling with expensive late fees and provide them with a semblance of financial respite. In other news, the Securities and Exchange Commission (SEC) has made a groundbreaking decision by approving a final rule requiring certain U.S. companies to disclose their climate change risks and greenhouse gas emissions. The rule, passed with a close 3-2 vote, establishes a comprehensive disclosure framework for publicly listed companies to educate investors and guide their decision-making processes. Under this new rule, companies will be compelled to commence climate disclosures as early as fiscal 2025, with greenhouse gas emissions reporting set to begin in fiscal 2026. The SEC emphasizes that climate risk is intrinsically intertwined with financial risk, underpinning the necessity for companies to furnish investors with transparent, comparable, and pertinent information on their climate-related initiatives. Mandatory disclosures encompass a range of factors, including climate risks that impact business strategy, operations, and financial standing, as well as the establishment of goals, transition plans, and associated costs related to climate events. Notably, 'Scope 3' disclosures, which pertain to emissions generated throughout a corporation's value chain by suppliers or customers, are not encompassed in the rule. The focus of the final rule centers on Scope 1 and 2 emissions, with only "large accelerated filers" and "accelerated filers" mandated to disclose such emissions if deemed material to investors. However, the approval of this rule is expected to trigger challenges and legal disputes, with some asserting that the SEC has overstepped its authority in advancing climate objectives. Nonetheless, the rule is seen as aligned with the SEC's core mission of safeguarding investors by ensuring that companies furnish comprehensive and truthful disclosures. By requiring firms to disclose their climate risks and emissions, the SEC aims to empower investors with the tools necessary to make informed decisions in a rapidly evolving climate-conscious landscape. Overall, these regulatory developments in the financial and environmental spheres underscore the evolving landscape of consumer protection and climate accountability, marking crucial steps towards a more transparent and responsible corporate sector.