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https://www.cbsnews.com/news/credit-card-late-fees-cfpb/
A federal judge in Texas has blocked a new government rule that would slash credit card late-payment charges, a centerpiece of the Biden administration's efforts to clamp down on "junk" fees.
Judge Mark Pittman of the U.S. District Court for the Northern District of Texas on Friday granted an injunction sought by the banking industry and other business interests to freeze the restrictions, which were scheduled to take effect on May 14.
In his ruling, Pittman cited a 2022 decision by the U.S. Court of Appeals for the Fifth Circuit that found that funding for the Consumer Financial Protection Bureau (CFPB), the federal agency set to enforce the credit card rule, is unconstitutional.
The regulations, adopted by the CFPB in March, seek to cap late fees for credit card payments at $8, compared with 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 on March 5 announced the ban on what it called "excessive" credit card late fees, the American Bankers Association (ABA) and U.S. Chamber of Commerce filed a legal challenge.
The ABA, an industry trade group, applauded Pittman's decision.
"This injunction will spare banks from having to immediately comply with a rule that clearly exceeds the CFPB's statutory authority and will lead to more late payments, lower credit scores, increased debt, reduced credit access and higher APRs for all consumers — including the vast majority of card holders who pay on time each month," ABA CEO Rob Nichols said in a statement.
A federal judge in Texas has blocked a new government rule that would slash credit card late-payment charges, a centerpiece of the Biden administration's efforts to clamp down on "junk" fees.
Judge Mark Pittman of the U.S. District Court for the Northern District of Texas on Friday granted an injunction sought by the banking industry and other business interests to freeze the restrictions, which were scheduled to take effect on May 14.
In his ruling, Pittman cited a 2022 decision by the U.S. Court of Appeals for the Fifth Circuit that found that funding for the Consumer Financial Protection Bureau (CFPB), the federal agency set to enforce the credit card rule, is unconstitutional.
The regulations, adopted by the CFPB in March, seek to cap late fees for credit card payments at $8, compared with 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 on March 5 announced the ban on what it called "excessive" credit card late fees, the American Bankers Association (ABA) and U.S. Chamber of Commerce filed a legal challenge.
The ABA, an industry trade group, applauded Pittman's decision.
"This injunction will spare banks from having to immediately comply with a rule that clearly exceeds the CFPB's statutory authority and will lead to more late payments, lower credit scores, increased debt, reduced credit access and higher APRs for all consumers — including the vast majority of card holders who pay on time each month," ABA CEO Rob Nichols said in a statement.
