WASHINGTON— The CFPB's decision to reopen its review of credit card late fees may ultimately produce a new rule, but industry attorneys say any attempt to revive the Biden Administration's controversial $8 cap is unlikely to survive either politically or legally.
The Bureau recently sent a request for information (RFI) on credit card late fees and late payments to the White House's Office of Information and Regulatory Affairs for review, marking the first step in what could become a new rulemaking effort. The move comes after a federal court vacated the CFPB's 2024 rule that would have capped most late fees charged by large credit card issuers at $8 after the Bureau acknowledged the rule exceeded its statutory authority under the Credit CARD Act.
Stephen Aschettino, partner and chair of Fintech & Digital Assets and co-chair of the Financial Services Industry Practice at Fox Rothschild, said the CFPB's latest move should be viewed as a meaningful restart—not a signal that the Bureau intends to simply resurrect the previous rule.
"I would treat this RFI as serious, but not as a straight line to another $8 rule," Aschettino told CU Today. "The CFPB is expressly in an information-gathering posture rather than proposing operative regulatory text today. In this political environment, the Bureau's most realistic path is to build a cleaner record, test the market data, and decide whether there is viable middle ground after the prior rule was stayed and then vacated."
Looking Beyond $8
Rather than returning to the Biden-era proposal, Aschettino believes any future CFPB proposal is likely to seek a compromise that can better withstand judicial scrutiny.
The existing safe-harbor framework allows issuers to charge up to $32 for a first late payment and $43 for subsequent violations, amounts adjusted annually for inflation. The now-vacated CFPB rule would have replaced those amounts with a flat $8 safe harbor for card issuers with more than one million open accounts.
Stephen Aschettino
"If a new rule comes out, I do not expect a simple replay of the Biden-era $8 cap," Aschettino said. "A commercially realistic proposal would likely land somewhere above $8—potentially in the mid-teens to low-$20s, or through a tiered structure for repeat late payments—because the CFPB now has to account much more carefully for costs, deterrence and consumer conduct."
That reflects one of the central criticisms raised during litigation. Banking groups argued the CFPB failed to adequately consider whether sharply reducing late fees would weaken incentives for consumers to make timely payments, ultimately increasing delinquencies and shifting costs elsewhere in the credit card system.
Litigation Almost Certain
Aschettino said any aggressive CFPB proposal will almost certainly face another legal challenge.
"The legal headwinds are substantial," he said. "The CARD Act requires late fees to be reasonable and proportional, and the last rule ran into a serious argument that the CFPB had not properly accounted for deterrence and consumer behavior."
He noted that the previous lawsuit—filed by organizations including the American Bankers Association, U.S. Chamber of Commerce and other business groups—ultimately resulted in the CFPB agreeing that the prior rule exceeded its statutory authority.
"If the Bureau proposes another aggressive cap, I would expect immediate comments, economic studies and likely litigation framed under the CARD Act, the Administrative Procedure Act and cost-benefit principles," Aschettino said.
What It Means for Credit Unions
For credit unions and other card issuers, Aschettino said the issue extends well beyond compliance.
While lower late fees would reduce costs for consumers who miss payments, issuers would likely have to reassess the economics of their credit card programs if penalty-fee revenue declines.
"The practical question is not just compliance," he said. "It is how to preserve responsible-payment incentives, manage delinquency risk and avoid pushing costs into APRs, annual fees, rewards, underwriting or reduced credit availability."
Industry groups made many of those same arguments during the debate over the 2024 rule, warning that artificially suppressing late fees could result in higher borrowing costs for all cardholders rather than only those who pay late.
For now, however, the CFPB remains in the earliest stage of the process. The pending RFI signals the Bureau is rebuilding the administrative record before deciding whether to issue a new proposal—a step Aschettino believes suggests regulators recognize that any future rule will need to be both economically defensible and legally durable if it is to survive where the last one failed.