Catherine Rusoff
A Texas judge must decide whether to drastically block the government’s new rules limit late credit card payments charges, a centerpiece in the Biden administration’s efforts to crack down on “unwanted” fees.
The regulations, adopted by the Consumer Financial Protection Bureau in March, would limit late fees for credit card payments to $8, a fraction of late charges that can be as high as $30. generate about $9 billion a year for card issuers, according to the agency.
Judge Mark Pittman of the U.S. District Court for the Northern District of Texas was given a May 10 deadline to decide whether to grant a preliminary injunction requested by banking and other business interests blocking restrictions now scheduled to take effect on May 14. of May.
After the CFPB on March 5 announced Following a ban on what it called “excessive” credit card late fees, the American Bankers Association and the U.S. Chamber of Commerce took legal action.
Tobin Marcus, chief political analyst at Wolfe Research, believes the industry will be able to stop the rule, setting up what could be a protracted trial before a final ruling in court. “Our expectation is that [Judge Pittman] will grant the injunction request”, he stated.
“Then there is the longer process of a trial in service of a final decision,” added the analyst.
Both the Chamber of Commerce and the CFPB declined to comment Friday.
As the legal battle plays out in court, credit card issuers are mapping out ways to counter what they expect to be a sharp drop in fee income, including potentially raising interest rates or adding fees for others. services.
According to consumer advocates supporting the CFPB’s late fee rule, card issuers hit customers with $14 billion in late payment fees in 2019, representing well over half of their fee revenue in that year. year. Financial industry critics say these late fees target low- and moderate-income consumers, particularly people of color.
“The CFPB’s March 2024 rule sets reasonable limits on credit card late fees, ensuring that consumers are not unfairly penalized for small payment delays,” said a coalition of 90 national and state advocacy groups in an April 24 report. Letter to legislators. “By capping late fees at no more than $8 and eliminating further automatic rate increases tied to inflation, the rule addresses the predatory practices that have allowed credit card companies to take billions of dollars from hard-working Americans through fees back-end.”
