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A federal judge on Tuesday dumped the rules of the U.S. Consumer Financial Protection Agency (CFPB) and limited the deferred fee for all credit cards to $8.
US District Judge Mark Pittman, Northern Texas District Court Judge, has approved a joint complaint from a coalition of six business and banking groups, including the American Bankers Association (ABA) and CFPB, to repeal the rules established last year.
The ABA and the U.S. Chamber of Commerce are one of the plaintiffs who challenged the rules in U.S. District Court in Northern Texas, claiming the department exceeds statutory authority.
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According to court documents, the group alleged that the rules violated the Credit Card Accountability and Disclosure and Control Procedures Act by prohibiting the card issuer “reasonably and proportionate to the violation.”
The woman has a credit card and smartphone to shop online. (istock / istock)
The rules were originally established by the Biden administration in March 2024. At the time, the CFPB estimated that the rules could save more than $10 billion a year on deferred fees by reducing the typical late fees, which cut the average $32 to up to $8. This is equivalent to an average savings of around $220 a year for the 45 million people who charge late fees.
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Bankrate senior industry analyst Ted Rossman told Fox Business this is widely expected given the changes in the presidential administration and related cuts at the CFPB.
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Rothman said the rule would benefit credit card holders who pay late, but “they would have paid it otherwise.”
On May 20, 2009, in Miami, Florida, customers will show off some of their credit cards to pay for items in the Italian market in Lorenzo. (Joe Raedle / Getty Images / Getty Images)
According to Rothman, credit card issuers have even increased other fees and even cut back on some perks like rewards.
“In fact, some issuers have preemptively raised other fees to prevent potential losses in late fee revenue, and those high fees could stay anyway,” Rothman said.
According to Bankrate, 33% of cardholders were charged late fees in 2020, with nearly half of them (about 47%) asking for exemptions. Of those who made the request, 82% received some form of relief. According to Bankrate, about 45% have waived all fees and 37% have been waived at least one.
In this picture, a credit card was used to pay for gasoline on February 7, 2024 in San Anselmo, California. (Justin Sullivan/Getty Images/Getty Images)
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In a statement Tuesday, the ABA said if the rules come into effect, “it will reduce more payments, lower credit scores, higher interest rates and credit access for those who need it most.”
The group added that “punished millions of Americans who paid credit card bills on time and Americans for reducing the critical incentives for consumers to manage their finances.”
