In a move aimed at eliminating junk fees and providing relief to struggling families, the Consumer Financial Protection Bureau (CFPB) has finalized a rule to cap most credit card late fees at $8. The regulation, which was first proposed last summer, is estimated to save American families more than $10 billion annually by significantly reducing fees that currently average around $32.

The new rule primarily applies to large credit card issuers with over 1 million accounts, representing more than 95% of total outstanding credit card debt, according to the CFPB. It comes as part of the Biden administration's broader efforts to address the high cost of living and provide assistance to those facing financial hardships.

The CFPB's push to tackle credit card fees follows a proposal in January to curb excessive overdraft charges. As credit card debt in the United States surpassed a record $1.1 trillion, with certain groups, particularly Millennials and individuals with lower incomes, struggling to keep up due to high inflation, this new regulation aims to alleviate some of the financial strain.

According to the CFPB, over 45 million people are charged late fees on credit cards each year, and the implementation of this rule is expected to save these individuals an average of $220 annually. The regulation intends to close a loophole that has allowed credit card companies to exploit borrowers by escalating fees for late payments, with the CFPB director, Rohit Chopra, stating that it ends the era of credit card companies hiding behind inflation as an excuse to hike fees for their own financial gain.

However, the financial industry has voiced concerns, arguing that the new regulation may cause more people to pay late, thereby damaging their credit scores. Greg Baer, CEO of the Bank Policy Institute, criticized the CFPB's decision, claiming that it prioritizes politics over the long-term benefits for consumers. The US Chamber of Commerce has also announced its intention to file a lawsuit against the CFPB to prevent what it deems a "misguided and harmful" regulation from taking effect.

Despite the criticism, the CFPB stands firm on its decision, highlighting the overwhelmingly positive comments it received when the rule was initially proposed. The agency believes that the new rule will put an end to credit card giants exploiting late fees as a significant revenue stream.

The rule will take effect 60 days after its publication in the Federal Register, which is expected to occur within the next few weeks. Analysts were surprised by the expediency with which the regulators plan to implement the rule, suggesting that it may be a strategic move to expedite potential litigation. If President Joe Biden wins reelection, it is anticipated that a court battle over the credit card rule could ultimately reach the Supreme Court, where the CFPB is believed to have an advantage.

The White House plans to showcase the ban on excessive credit card late fees during President Biden's Competition Council, where steps aimed at "fighting corporate rip-offs" will be detailed. Consumer advocates have praised the new regulations, asserting that they will provide much-needed relief to vulnerable families. Sen. Elizabeth Warren of Massachusetts hails the CFPB's move as a significant step in curbing Wall Street profits and ensuring that the government works for the people, not big banks.