A federal judge in Texas has blocked a new government rule that: Eliminate credit card payment delays This is the centerpiece of the Biden administration’s efforts to crack down on “junk” fees.
Judge Mark Pittman of the U.S. District Court for the Northern District of Texas on Friday granted an injunction sought by the banking industry and other business interests to freeze the restrictions, which were scheduled to take effect May 14.
In his ruling, Pittman cited a 2022 ruling by the U.S. Court of Appeals for the Fifth Circuit that funding the Consumer Financial Protection Bureau (CFPB), the federal agency that enforces credit card regulations, was unconstitutional. Quoted.
The regulation, adopted by the CFPB in March, caps late fees on credit card payments at $8, compared to current late fees of $30 or more. The agency says that while it’s a pain for consumers, the fees generate about $9 billion a year in revenue for card issuers.
After CFPB on March 5th announced The American Bankers Association (ABA) and the U.S. Chamber of Commerce have filed a legal challenge to the ban on so-called “excessive” credit card late fees.
The industry group ABA praised Pittman’s decision.
“This injunction relieves banks from immediately having to comply with rules that clearly go beyond the CFPB’s statutory authority, and will result in increased late payments, lower credit scores, increased debt, and lower credit costs for all consumers, including the vast majority.” “This will reduce access and lead to higher annual interest rates on the percentage of cardholders who make on-time payments each month,” ABA CEO Rob Nichols said in a statement.
Consumer groups slammed the decision, saying it would hurt credit card users across the United States.
“In the latest in a series of lawsuits aimed at inflating corporate profit records at the expense of everyone else, the U.S. Chamber of Commerce has given way for now, allowing a family to pay $41 in late credit card fees.” That high price guarantees that prices will continue to go up for a little longer,” Liz Zelnick of the nonpartisan advocacy group Accountable.US said in a statement. “The U.S. Chamber of Commerce and the major banks they represent have corrupted our judicial system by deliberately avoiding hearing cases before fair and impartial federal judges and instead trying them in the court of least resistance.”
Credit card issuers charged customers $14 billion in late fees in 2019, well over half of their fee revenue that year, according to consumer advocacy groups that support the CFPB’s late fee rules. Critics in the financial industry say these late fees target low- and moderate-income people, especially people of color.
Even though Pittman remained in office Friday, analysts said the legal battle over late fees is likely to continue and the case could reach the Supreme Court.
“If the Supreme Court rules in the coming weeks that Congress adequately funded the CFPB, this could lead to “We believe this will pave the way for the CFPB to seek relief from the preliminary injunction.” “That’s why we believe this is not the end of the fight over whether rate reductions should go into effect before we fully consider the merits of the litigation.”
—Reported by Alan Scherter of CBS News
