Judge blocks rule capping credit card late fees at $8 in win for business groups

A federal decide in Texas on Friday blocked the Client Monetary Safety Bureau’s new rule for an $8 cap on credit card late fees, a victory for enterprise and banking teams that mentioned the regulator exceeded its authority.

US District Choose Mark Pittman in Fort Value issued a preliminary injunction towards the rule, which was scheduled to take impact on Could 14. The injunction was urged by teams together with the US Chamber of Commerce and the American Bankers Affiliation.

Pittman, an appointee of Republican former President Donald Trump, cited a 2022 ruling by the New Orleans-based fifth US Circuit Court docket of Appeals, which discovered the CFPB’s funding construction unconstitutional.

A brand new rule capping late charges on bank cards at $8 was scheduled to take impact Monday. REUTERS

“Consequently, any laws promulgated below that regime are possible unconstitutional as effectively,” Pittman wrote. “Thus, Plaintiffs set up a chance of success on the deserves.”

The US Supreme Court docket is reviewing the 2022 ruling, and throughout oral arguments in October appeared cautious of upholding it. Pittman stays certain by the ruling as a result of his courtroom is within the fifth Circuit’s jurisdiction.

A CFPB spokesperson mentioned the regulator would hold defending the rule, a key a part of the Biden administration’s crackdown on “junk fees.”

“Shoppers will shoulder $800 million in late charges each month that the rule is delayed–cash that pads the revenue margins of the biggest bank card issuers,” the spokesperson mentioned in a press release.

A CFPB spokesperson mentioned the regulator would hold defending the rule, a key a part of the Biden administration’s crackdown on “junk charges.” REUTERS

Maria Monaghan, counsel to the Chamber of Commerce Litigation Heart, in a press release known as Pittman’s determination “a significant win for accountable shoppers who pay their bank card payments on time and companies that need to present inexpensive credit score.”

The CFPB adopted the rule to counteract what it known as “extreme” charges that bank card issuers cost for late funds.

The rule would block card issuers with greater than 1 million open accounts from charging greater than $8 for late charges, until they may show greater charges are essential to cowl their prices.

President Biden and White Home financial adviser Lael Brainard at an occasion final yr discussing junk charges. REUTERS

In line with the CFPB, issuers collected extra than $14 billion of bank card late charges in 2022, with a median payment of $32.

Enterprise and banking teams sued in March to dam the rule. The case had been delayed in a jurisdictional back-and-forth over whether or not the case ought to stay in Texas, after Pittman initially transferred it to Washington, DC.

The fifth Circuit in the end reversed that call and final week gave Pittman a Could 10 deadline on whether or not to situation an injunction.

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