Dallas, Texas – A federal judge in Texas has issued an injunction blocking a new government rule aimed at reducing credit card late-payment charges, which was set to take effect on May 14. Judge Mark Pittman of the U.S. District Court for the Northern District of Texas granted the injunction sought by the banking industry and other business interests.
Pittman’s decision came after the U.S. Court of Appeals for the Fifth Circuit deemed the funding for the Consumer Financial Protection Bureau (CFPB) unconstitutional in a 2022 ruling. The CFPB was tasked with enforcing the new credit card rule to cap late fees at $8, a significant decrease from the current fees of $30 or more that generate about $9 billion annually for card issuers.
This ruling, adopted by the CFPB in March, faced legal challenges from industry groups like the American Bankers Association (ABA) and the U.S. Chamber of Commerce, who argued that the rule exceeded the CFPB’s authority. ABA’s CEO, Rob Nichols, praised Pittman’s decision, stating that it would prevent adverse effects on consumers, including increased debt and reduced credit access.
However, consumer groups criticized the decision, warning that it would harm credit card users across the country. Liz Zelnick of Accountable.US condemned the ruling, accusing industry groups like the U.S. Chamber of Commerce of prioritizing corporate profits over the financial well-being of consumers.
Supporters of the CFPB’s late-fee rule argue that credit card issuers have imposed $14 billion in late-payment charges in 2019, disproportionately affecting low- and moderate-income consumers, especially people of color. Despite the temporary stay issued by Pittman, analysts anticipate a continued legal battle over late fees, with the case potentially reaching the Supreme Court.
Looking ahead, experts suggest that the outcome of the Supreme Court’s ruling on the funding of the CFPB could impact the future enforcement of the fee reduction. Jaret Seiberg of TD Cowen Washington Research Group highlighted the ongoing legal challenges surrounding the fee cut, indicating that the fight over its implementation is far from over.