A coalition of groups is calling for the Biden administration to withdraw the new rule put forward by the Consumer Financial Protection Bureau (CFPB) to impose a stricter cap on credit card late fees, arguing the regulation will hurt consumers and economic growth.

In a letter sent to President Biden and CFPB Director Rohit Chopra, as well as Congress’ banking, financial services and small business committees, the 30 signatory groups outlined their “strong opposition” to the late fees rule. The Biden administration’s rule would reduce the safe harbor dollar amount that credit card issuers can charge in late fees from up to $41 to $8. The rule would also eliminate the automatic inflation adjustment to that amount and ban late fees amounting to more than 25% of the consumer’s required credit card payment.

“At the White House this month, President Biden touted the rule, alleging it would give the most vulnerable Americans among us a much-needed break,” the groups wrote. “This isn’t true. A stricter price cap will harm not only small businesses and the economy at large but also the low-income workers that the administration is intending to help. History indicates that consumers are the ones who bear the brunt of regulations like this one because, to offset the resulting costs, financial institutions ultimately impose new fees and higher interest rates while reducing Main Street’s credit access.”

The groups also raised concerns about the rule’s impact on smaller financial institutionsthat rely more heavily on fees to cover the costs of extending credit to consumers.

In its announcement of the proposed rule, the CFPB said that it “preliminarily found that late fee income exceeds associated collection costs by a factor of five” and that because credit card issuers can currently charge up to $41 for late fees, a “late fee of $8 would be sufficient for most issuers to cover collection costs incurred as a result of late payments.”

Read the full text here