In preparation for the impact of the Credit Card Act, all eight of the top credit card issuers have imposed larger late fees, even for borrowers with small balances. While credit card issuers claim that they impose late fees on a sliding scale with smaller balances taking less of a hit, that couldn’t be farther from the truth. Yes, credit card companies are using a sliding scale to determine the dollar amount of a late fee, however, they have made changes to their policies that cause many borrowers with smaller balances to get hit with a large late fee.
Before 2004, a borrower with a credit card balance of $1,000 would be hit with a $35 late fee while those with significantly lower balance would receive a lower late fee. But recent changes in who is defined as having a high balance has caused a $250 balance credit card to receive the same late fee amount as a $1,000 balance credit card. The change is policy has made such a huge impact on credit card borrowers that now the average late fee is $39 while the typical past due amount is $50. That doesn’t sound like a fair late fee policy.
While every debtor should take care and pay their bills in a timely fashion, it is not reasonable, nor ethical to assess late fees that are disproportionate to how much the debtor owes. It may be wise for our legislators to closely watch developments in the credit card industry such as the late fee shenanigans so that credit card debtors don’t find themselves suffering under new unethical practices after the Credit Card Act goes in effect next year.