Opinion: Lowering credit card late fees is long overdue.

Editor’s note: ed meerswinski He is the senior director of federal consumer programs at US PIRG, a nonprofit consumer organization. The views expressed in this commentary are his own.See more opinion On CNN.

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Cookie Monster may be angry about “shrinkflation” (the practice of companies reducing the quantity and size of products such as cookies without also lowering the price), but the greedy Muppet is trying to help tens of millions of Americans A person has more money (perhaps he can buy baked goods).

The Consumer Financial Protection Bureau (CFPB) made the announcement on Tuesday. It would close a loophole that causes Americans to pay more than $14 billion a year in late credit card fees.

My consumer organization, the U.S. Public Interest Research Group (US PIRG), was involved in the creation of the Credit Card Accountability and Disclosure Act of 2009 (CARD Act), and nearly 15 years ago, I was a I worked at the garden. Then-President Barack Obama signed it into law. Congress designed this bill to protect consumers from the predatory practices of banks and other credit card issuers.

One important part of this law is intended to allow banks to charge late fees only to recover related costs. However, when the Federal Reserve Board, which was in charge of credit card regulation at the time, created supplementary rules in 2010, it included provisions that allowed credit card companies to charge up to $25 to $35 without obtaining credit card rights. It also included an “exemption clause” that allowed for. To justify it. Even though digital efficiencies have lowered costs for banks, the amount rose to between $30 and $41 after accounting for inflation.

Card Act rules require that such fees be “reasonable and proportionate” to the cost of processing late payments. It is only fair that banks absorb the cost of extra work caused by late fees. However, the CFPB found that many issuers increase late fees in lockstep each year, with no evidence of increased costs. Currently, the CFPB estimates that the largest credit card companies derive revenue from late fees that are approximately five times their processing costs.

It’s unfair for companies to take advantage of consumers who have no option to fight back. In today’s increasingly cashless lifestyle, credit cards are essential. Some people have noticed that their payments have been delayed, but given the unreliability of the U.S. mail and various banking apps and websites, even well-intentioned people may find that their payments are delayed. Automatic late fees may apply. In that case, unlike a “junk fee” added to a hotel bill or concert ticket, the consumer cannot cancel the transaction at that point or choose a different bank to avoid the fee. you can’t.

Thankfully, this new rule builds on the CFPB’s nearly 13 years of successful results for consumers. This could save Americans a total of $10 billion a year. Currently, the average late penalty is approximately $32. However, the new rules set the maximum fee at $8 and end automatic inflation adjustments to that amount for card issuers with more than 1 million open accounts.

This improved rule still has one major loophole. This means that large card issuers that can prove they have higher collection costs can charge $8 or more to cover those costs. So what’s stopping credit card companies from violating the spirit of this rule? According to the CFPB, this rule encourages credit card issuers to make on-time payments more effective than relying on late fees. It is designed to generate a lot of profit.

The new rules were announced less than half a day before the U.S. Chamber of Commerce announced it would sue the CFPB. However, the CFPB has built a reputation for representing consumers against the special interests of powerful corporations.

A credit card company was arrested for putting its hand in the cookie jar. Now, the CFPB is making sure they get the right dessert. From Main Street to Sesame Street, this will ensure that American consumers no longer have to pay unfair late fees.