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Account management

Expect your credit card late payment fees to rise a dollar in 2020

The CARD Act of 2009 lays down guidance for the maximum late fee payments an issuer can legally charge

Summary

The CFPB’s adjustment for inflation nudges up the maximum late payment fees an issuer can charge for 2020 to $40.

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Your card issuer could nudge up your penalty for a late credit card payment to $40 in 2020, with the Consumer Financial Protection Bureau’s annual adjustment for inflation.

The consumer protection agency bases its inflation adjustment on the consumer price index for urban workers.

The Credit CARD Act of 2009 introduced a ceiling for reasonable fees that card issuers should stick to, and for 2020 the CFPB has raised this amount to $40, from $39 in 2019. This applies if you miss a payment for the second time in the last six months. For a first-time late payment, the fee would be capped at $29, up a dollar from 2019’s $28.

When the CARD Act was passed, it initially capped the late payment fees at $25 for a first miss, and $35 for subsequent late payments within a six-month period.

See related: How credit card interest works

This limit provides guidance for the maximum fees that card issuers can impose, and their fees could be below these levels, but they generally prefer to go with the capped amounts.

Issuers cannot hike up their late fees beyond this “safe harbor” amount set by law unless they can make a case that their costs, such as for collections, are higher than the legal capped amount.

In any event, the CARD Act specifies that a card issuer generally cannot charge you a late fee that is higher than the minimum payment you didn’t make. This means if your minimum payment was $15, the card issuer cannot charge you a late fee higher than that.

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