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CFPB Issues Proposed Rule Regarding Credit Card Penalty Fees

Michael Christians • February 2, 2023

On February 1st, the Consumer Financial Protection Bureau (CFPB) issued a proposed rule regarding credit card penalty fees.

Section 1026.52(b) of Regulation Z imposes limitations on penalty fees that may be charged by a card issuer in connection with a credit card account. Currently, the rule provides for a safe harbor. It states that a card issuer may impose a fee for a cardholder's violation of the terms or other requirements of a credit card account so long as the fee does not exceed:

$30 for a first violation (current as of 1/1/2022)
$41 for a subsequent violation (current as of 1/1/2022)

The CFPB's proposed rule adjusts the safe harbor amount specifically for late fees to $8 for both first and subsequent violations. This new late fee safe harbor amount would not be subject to adjustment on an annual basis. It also imposes a cap on late fees, not to exceed 25% of the required payment amount.

It retains the current structure for other penalty fees (other than late fees) of $30 for a first violation and $41 for a subsequent violation. Those amounts remain subject to adjustment on an annual basis based on changes to the Consumer Price Index.

You can access the text of the proposed rule here.

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