Written by Nate Raymond
(Reuters) – A federal judge in Texas on Friday rejected the Consumer Financial Protection Bureau's request to lift an order blocking a new U.S. regulation capping credit card late fees at $8. The policy has been challenged by corporate and banking groups.
U.S. District Judge Mark Pittman in Fort Worth refused to rescind a May injunction blocking the rule, part of a broader crackdown on “junk fees” by the administration of Democratic President Joe Biden.
The regulation would prevent card issuers with more than 1 million open accounts from charging late fees of more than $8 unless they can prove the higher fees are necessary to cover the cost. .
The CFPB asked the judge to reconsider the injunction, saying the lawsuit was based solely on an appeals court ruling that declared the agency's funding structure unconstitutional, a ruling that was later overturned by the U.S. Supreme Court. It was done.
But Pittman agreed with groups that challenged the regulation, including the U.S. Chamber of Commerce and the American Bankers Association, that it could be blocked for other reasons.
Pittman, who was appointed during Republican President-elect Donald Trump's first term, said the rule was part of the Credit Card Liability Act, a 2009 U.S. law aimed at protecting consumers from unfair practices by card issuers. He said it was a violation of disclosure laws.
Pittman said the law regulates excessive fees, but also prevents card issuers from imposing “penalties” if a customer violates a credit card contract, such as failing to pay on time. It is said that he acknowledged it.
“Congress appointed the CFPB to be the umpire to call balls and strikes on the reasonableness and proportionality of penalties,” Pittman said, using a baseball analogy.
But by preventing card issuers from actually imposing penalties, the CFPB “created a strike zone large enough for pitchers in the middle,” Pittman wrote.
The judge also rejected the CFPB's latest request to move the case from Texas to Washington state.
A CFPB spokesperson said the judge's ruling “allows major banks to collect exorbitant $27 million in late fees from American families every day.”
The agency estimates that without the rule, people would spend more than $56 billion on credit card fees over the next five years.
The Chamber of Commerce had no immediate comment.
(Reporting by Nate Raymond in Boston; Editing by Leslie Adler and Will Dunham)
