Biden administration looking at curbing credit card late fees

Yahoo Finance columnist Kerry Hannon details how the Biden administration is looking to put a limit on credit card late fees.

Video Transcript

DAVE BRIGGS: The Biden administration announcing its latest attempt to crack down on hidden fees. This time, they're targeting credit card late fees. Oh, they are a nuisance. Here with the latest is Yahoo Finance's Kerry Hannon. Kerry, good to see you. What are we learning?

KERRY HANNON: Hey, Dave. Yeah, they certainly are a nuisance. Yeah, what the Biden administration is looking at doing is curbing the late fees on credit cards to $8, right? Now this is what it is the average has been around $41 for late payments, for missed payments and late payments. So this is a big deal because credit card companies, a Consumer Financial Protection Board is put together this plan. It does not require congressional approval. They are publishing it in the Federal Register.

And what it's going to say is now, like, right now, the rule as it is now, credit card companies can charge 100% of the minimum payment that you owe them as a late fee. What they're hoping to do is bring that down, as I said, to curb it at $8, but also limit it to 25% of what that minimum amount due is.

Now, remember, when people are paying this late fee, it's not only that you're paying that late fee, but you're also paying that incredible and the percentage rate of the interest rates today, which are in January, the APR the average one on a new car was-- card-- was 23.39%. I mean, that is a huge amount. So if you have that on top of this late fee, it's really been very, very onerous on the credit card holders.

And this tends to really impact people who are in low incomes that have low credit scores. So it just multiplies, and the problem just gets worse. So I think this is a really important move that they're making. And rates have been on the rise. These late fees have been on a rise since 2010, so an attempt to kind of take control of these.