A federal judge in Texas on Friday blocked a new Consumer Financial Protection Bureau rule that would have capped credit card late fees at $8, a victory for companies and banking groups that said the regulator exceeded its authority.
U.S. District Judge Mark Pittman in Fort Worth. preliminary injunction The injunction had been sought by groups including the U.S. Chamber of Commerce and the American Bankers Association.
Pittman, an appointee of former Republican President Donald Trump, cited a 2022 ruling by the New Orleans-based U.S. Court of Appeals for the Fifth Circuit that found the CFPB’s funding structure unconstitutional.
“Therefore, any regulations promulgated under that administration are likely to be unconstitutional as well,” Pittman wrote. “Plaintiffs therefore establish a likelihood of success on the merits.”
The U.S. Supreme Court is considering the 2022 ruling and appeared cautious about upholding it during oral arguments in October. Because Pittman’s court falls within the jurisdiction of the Fifth Circuit, Pittman remains bound by the judgment.
A CFPB spokesperson said the regulator will continue to uphold the rule, which is a key part of the Biden administration’s “junk fee” crackdown.
“Delays in enforcing the rule will cost consumers $800 million a month in late fees, an amount that will inflate the profits of the largest credit card issuers,” a spokesperson said in a statement. Ta.
Maria Monaghan, an attorney with the Chamber of Commerce Litigation Center, said in a statement that Pittman’s decision is “a major victory for responsible consumers who pay their credit card bills on time and for businesses that want to provide affordable credit.” ” he said.
The CFPB adopted this rule to combat “excessive” fees that credit card issuers charge for late payments.
The rule 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.
According to the CFPB, issuers collected more than $14 billion in credit card late fees in 2022, with the average fee being $32.
Business and banking groups filed a lawsuit in March seeking to block the rule. The case had been delayed after Pittman first transferred it to Washington, D.C., as jurisdictions went back and forth over whether to keep the case in Texas.
The Fifth Circuit ultimately reversed that decision and last week gave Pittman a May 10 deadline to decide whether to issue an injunction.
