Texas Judge Rules to Stop CFPB Credit Card Fee Rule
The rule capping credit card late fees at $8 was set to begin this week.
The CFPB received a setback to a rule it finalized in March that would lower typical credit card late fees from $32 to $8, when a judge with the Northern District of Texas granted a motion for a preliminary injunction to the rule on Friday.
The rule was scheduled to begin this week and would only apply to issuers with more than one million open accounts; for credit unions, that would only include Navy Federal Credit Union.
Two days after the CFPB issued its final rule cutting credit card fees to $8, the U.S. Chamber of Commerce filed a lawsuit to stop the implementation of the Bureau’s controversial rule. Co-plaintiffs included the Fort Worth Chamber of Commerce, Longview Chamber of Commerce, American Bankers Association, Consumer Bankers Association and Texas Association of Business. America’s Credit Unions supported the efforts of those involved in the lawsuit.
After Friday’s ruling was announced, U.S. Chamber of Commerce Litigation Center Counsel Maria Monaghan said, “This ruling is a major win for responsible consumers who pay their credit card bills on time and businesses that want to provide affordable credit. The CFPB’s attempted micromanagement would have raised costs for most credit card users and made it harder for businesses to meet consumers’ needs. The U.S. Chamber will continue to hold the CFPB accountable in court.”
The lawsuit stated the CFPB’s rule “upends the way that credit card issuers have assessed late fees for over a decade” and “is already imposing immediate and irreparable harm on the affected credit card issuers, who account for an estimated 95% of open credit card accounts in this country.”
The lawsuit claimed the final rule had already created chaos in the credit card system.
“Should such issuers take the CFPB’s advice to mitigate the effect of the rule by changing other credit card terms, they would need to provide additional updated disclosures, with at least 45 days’ notice to their customers. If such issuers are unable to complete these tasks within 60 days of the rule’s publication in the Federal Register, they risk being out of compliance on the effective date, exposing themselves to civil enforcement actions. And they risk all of this for a regulation that both exceeds the CFPB’s statutory authority and was issued with funds acquired in violation of our Constitution. Plaintiffs request preliminary injunctive relief to preserve the status quo while they litigate their claims. That status quo has served the interests of American consumers and credit card issuers alike for over a decade.”
CFPB Director Rohit Chopra has said the new rule will lower typical late fees from $32 to $8 in most cases, saving American families $10 billion a year, or an average of $220 per year for the more than 45 million people who are charged late fees.