FORT WORTH, Texas—A federal judge here has rejected a request by the CFPB to lift an order that has blocked its new regulation capping credit card late fees at $8, Reuters reported.
The policy has been challenged by business and banking groups, including the U.S. Chamber of Commerce, the American Bankers Association and other trade groups.
U.S. District Judge Mark Pittman declined to dissolve an injunction he issued in May that barred the rule. The regulation would block card issuers with more than one million open accounts from charging more than $8 for late fees unless they can prove higher fees are necessary to cover their costs, Reuters said.
In asking the judge to revisit the injunction, the CFPB said the action had rested entirely on an appeals court's ruling declaring the agency's funding structure unconstitutional - a decision subsequently overturned by the U.S. Supreme Court, Reuters said.
But Pittman agreed with groups that had sued to challenge the regulation that the rule could still be blocked on other grounds. Pitt man said the rule violated the Credit Card Accountability and Disclosure Act, a 2009 U.S. law designed to protect consumers from unfair practices by card issuers, Reuters reported.
Penalty Fees
The law regulated excessive fees but allowed card issuers to impose "penalty" fees when a customer violated a credit card agreement, including by failing to make an on-time payment, Pittman said.
"Congress assigned the CFPB as an umpire to call balls and strikes on the reasonableness and proportionality of penalty fees," Pittman said.
But by preventing card issuers from actually imposing penalty fees, the CFPB impermissibly "established a strike-zone only large enough for pitches right down the middle," Pittman wrote, according to the Reuters report.
The judge also rejected the CFPB's latest request to transfer the case out of Texas to Washington, Reuters added.