Federal regulators have implemented a rule to limit most credit card late fees to $8, part of the Biden administration’s broader initiative to eliminate excessive fees. The Consumer Financial Protection Bureau (CFPB) estimates that this new regulation, proposed last summer, will save families over $10 billion annually by reducing fees from an average of $32. The rule applies to major credit card issuers with more than 1 million accounts, which represent over 95% of total outstanding credit card debt. This move to address credit card fees is part of the administration’s efforts to assist families grappling with the high cost of living. It follows a CFPB proposal in January to restrict excessive overdraft fees.

The new regulation arrives as Americans accumulate record-high credit card debt exceeding $1.1 trillion. Some borrowers, especially Millennials and those with lower incomes, have struggled with credit card debt amid high inflation. According to the CFPB, over 45 million people incur late fees on credit cards annually, saving an average of $220 per year under the new rule. The regulation aims to close a 2010 loophole that allowed credit card companies to raise fees on late-paying borrowers.

CFPB Director Rohit Chopra stated, “For over a decade, credit card giants have been exploiting a loophole to harvest billions of dollars in junk fees from American consumers.” However, the financial industry criticized the CFPB, warning that the new regulation could lead to more late payments and damage consumers’ credit scores. The US Chamber of Commerce plans to file a lawsuit against the CFPB to prevent what it calls a “misguided and harmful” regulation.

The ban on excessive credit card late fees is set to be highlighted by the White House, with President Joe Biden convening his Competition Council to discuss steps against “corporate rip-offs.” Consumer advocates have praised the new regulations as a way to assist vulnerable families, describing the rule as “reasonable” and a meaningful change.