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Section 149 of the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 is implemented in part in Regulation Z, section 1026.52(b). The CARD Act prohibits penalty fees that are not reasonable and proportional. However, Congress gave the Federal Reserve Board discretionary authority to create a safe harbor to provide complete immunity from that statutory prohibition. The Board used that discretionary authority to issue a safe harbor codified in Regulation Z of $25 for the first violation and $35 for subsequent violations of the same type within 6 billing cycles. These safe harbors have been adjusted annually for inflation. Authority to amend this safe harbor transferred to the CFPB pursuant to sections 1061 and 1100A of the Consumer Financial Protection Act of 2010.

In March 2024, the CFPB amended Regulation Z to address late fees charged by card issuers that together with their affiliates have one million or more open credit card accounts (referred to as Larger Card Issuers). For Larger Card Issuers, the final rule (1) repealed the safe harbor for late fees, (2) adopted a different late fee safe harbor of $8 and eliminated a higher safe harbor dollar amount for late fees for subsequent violations of the same type; and (3) provided that the annual inflation adjustments do not apply to this $8 amount. The above changes did not apply to late fees charged by smaller card issuers. That March 2024 rule has been subject to legal challenge.

In the future, and considering the status of the March 2024 Rule and market conditions, the CFPB will assess the efficacy of the regulatory landscape and whether the regulatory safe harbor is outdated and should be eliminated.