Federal judge blocks White House plan to curb credit card late fees

A federal judge in Texas has blocked a new government rule Credit card deduction for late payment The fee is the centerpiece of the Biden administration's efforts to crack down on “junk” fees.

Judge Mark Pittman of the U.S. District Court for the Northern District of Texas on Friday approved an injunction sought by the banking industry and other business interests to block the restrictions, which were scheduled to take effect on May 14.

In his decision, Pittman cited a 2022 decision by the US Court of Appeals for the Fifth Circuit, which found that funding for the Consumer Financial Protection Bureau (CFPB), the federal agency set to enforce the credit card rule, is unconstitutional .

Rules adopted by the CFPB in March limit late fees for credit card payments to $8, up from current late fees of $30 or more. Although a bane for consumers, the fees generate about $9 billion a year for card issuers, according to the agency.

After the CFPB announced a ban on “excessive” credit card late fees on March 5, the American Bankers Association (ABA) and the US Chamber of Commerce filed a legal challenge.

Industry trade group ABA praised Pittman's decision.

“This injunction will immediately protect banks from complying with a rule that clearly exceeds the CFPB’s statutory authority and will lead to more late payments, lower credit scores, increased debt, less credit access and higher APRs for all consumers.” That includes the vast majority of cardholders who pay on time every month, ABA CEO Rob Nichols said in a statement.

Consumer groups criticized the decision, saying it would harm credit card users across the U.S.

“In the latest of its lawsuits designed to record corporate profits at the expense of everyone else, the U.S. Chamber has gotten its way for now, ensuring that families will be on the hook for as little as $41 with credit card late fees. should get a higher price, Liz Zelnick of Accountable.US, a non-partisan advocacy group, said in a statement. “The US Chamber and the big banks they represent have avoided having their case heard by an impartial and neutral federal judge.” has corrupted our judicial system by going out of its way to buy into the courtrooms of least resistance.”

“Junk fees” cost Americans billions of dollars every year

According to consumer advocates supporting the CFPB's late-fee rule, credit card issuers lost customers $14 billion in late-payment fees in 2019, which accounted for more than half of their fee revenue that year . Financial industry critics say such late fees target low- and moderate-income consumers, particularly people of color.

Despite Pittman's stay on Friday, analysts said the legal fight over late fees is likely to continue, with the case possibly going to the Supreme Court.

“We believe this opens the door for the CFPB to lift the preliminary injunction if the Supreme Court rules in the coming weeks that Congress would allow it,” Jarrett Seeberg of TD Cowen Washington Research Group said in a report after the decision. has funded the agency appropriately.” “That's why we believe this is not the end of the fight over whether a fee reduction will be effective without fully considering the merits of the lawsuit.”

-With reporting from CBS News' Ellen Sherter

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