Judge blocks Biden administration rule setting credit card late fees at $8

New York
CNN
—

A federal judge in Fort Worth, Texas, on Friday blocked a new Biden administration rule that would prevent credit card companies from charging customers late fees of more than $8.

U.S. District Judge Mark T. Pittman, an appointee of former President Donald Trump, issued a preliminary injunction to several commercial and banking institutions that claim the new rule violates several federal laws.

These organizations, led by the right-leaning U.S. Chamber of Commerce, sued the Consumer Financial Protection Bureau after the rule was finalized in March. The CFPB estimates that the rule, which was scheduled to take effect Tuesday, would save consumers about $10 billion annually by lowering fees from an average of $32.

A preliminary injunction means that the rule cannot take effect until a hearing is held where the case can be decided in more detail.

“The credit card lobby’s lawsuit is an attempt to derail the rule that would save families $10 billion annually in order to continue to make tens of billions of dollars in profits by charging borrowers late fees that far exceed their actual costs,” a CFPB spokesperson said. CNN in a statement. “Consumers will incur $800 million in late fees every month the rule is deferred — money that covers the profit margins of the largest credit card issuers. We will continue to defend this rule so working families can stop paying the excessive late fees that Congress banned more than a decade ago.” .

The US Chamber of Commerce did not respond to CNN’s request for comment.

“It is disappointing that the court approved this latest effort by banks to prevent these critical limits on credit card late fees from going into effect next week,” said Chuck Bell, advocacy program director at the nonprofit Consumer Reports. “Credit card companies have been cheating consumers out of billions of dollars in excessive late fees for too long.”

The rule, first proposed in February 2023, is part of a broader push by the Biden administration to eliminate “junk fees,” which are hidden or misleading charges to consumers.

the The new rule will apply to large credit card issuers – Those with more than a million accounts. These companies account for more than 95% of all outstanding credit card debt, according to the CFPB.

The push to target credit card fees is part of the Biden administration’s effort to ease financial burdens on many Americans. Some borrowers, especially millennials and low-income people, have They defaulted on their credit card debt After more than two years of high inflation.

The new rule also aims to close a 2010 loophole that the CFPB says credit card companies “exploited” to raise fees on late payments.

According to a national Consumer Reports survey published in September, one in five American adults said they had paid late fees on a credit card in the previous 12 months. 82% said they support reducing the maximum late fees.