The ruling has lowered the charge from its previous figure of $32, in a move that the regulator hopes will save account holders more than $14 billion a year while axing what it describes as business models founded on “penalties, fee harvesting, and bait-and-switch tactics”.
It is a direct response to the realised flaws of the Credit Card Accountability Responsibility and Disclosure (CARD) Act, which was initially passed by the US Congress in 2009 to prevent issuers from charging more than the associated cost of covering a late payment.
Despite this, issuers appeared quick to exploit a discrepancy in the act which states that accountability can be sidestepped if no more than $25 is charged for the first late payments and $35 for subsequent late payments.
