Biden Caps Credit Card Late Fees to $8: Impact on Consumers

By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).

Updated on October 2, 2025.

During President Joe Biden’s State of the Union Address, he announced to cap credit card late fees at $8, down from the average of $32. These “junk fees,” as termed by the White House, have been a substantial burden on consumers but profitable for creditors as it amounts to more than $14 billion annually. With household credit card debt surpassing $1.3 trillion, this move by the Consumer Financial Protection Bureau (CFPB) aims to save cardholders up to $10 billion each year by closing loopholes that have allowed creditors to exploit inflation-driven fee increases.

Key Points:

• Household credit card debt exceeds $1.3 trillion, an all-time high.
• Credit card late fees have been reduced to $8 per the Biden Administration and the Consumer Financial Protection Bureau.
• Junk fees cost consumers more than $14 billion annually.

Credit Card Debt and Junk Fees

At last night’s State of the Union Address, President Joe Biden announced a new rule to reduce late fees to $8 max on credit card payments. The average late fee imposed by credit card companies is $32. These late fees have been labeled “junk fees” by the White House.

The Consumer Financial Protection Bureau (CFPB) estimates this will save borrowers up to $10 billion annually.

 “For over a decade, credit card giants have been exploiting a loophole to harvest billions of dollars in junk fees from American consumers,” said CFPB Director Rohit Chopra. “Today’s rule ends the era of big credit card companies hiding behind the excuse of inflation when they hike fees on borrowers and boost their own bottom lines.”

The CARD Act

The loophole Director Chopra is referring to is the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act), where the Federal Reserve allowed late fees by tying them into inflation. The late fee is based on the bank’s costs to recover the payment. The Federal Reserve Board of Governors allowed a $25 maximum fee for the first late payment and $35 for additional late payments.

The CARD Act was Congress’ response to the concern that credit card companies focused more on collecting late fees as a business model. The CFPB states that since 2010, borrowers have been charged more in delinquent credit card late fees each year because of the inflation loophole.

By 2022, banks were collecting more than $14 billion in late fees. This equals more than ten percent of what creditors were collecting in interest and fees. Unfortunately, it’s a double whammy for consumers because late payments are also reflected on the borrower’s credit report. Negative credit reporting affects credit scores and usually leads to higher interest rates, costing consumers more.

What is interesting about the CFPB’s ruling is that it only applies to lenders with more than 1 million open accounts. These companies account for over 95% of outstanding credit card balances. On average, smaller lenders generally charge lower rates and fees.

Currently, Americans have more than $1.3 trillion in credit card debt.

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Updated initially on Updated on January 29, 2025.