FORT WORTH, Texas–A judge has issued an injunction that delays implementation of the CFPB’s credit card late fee cap of $8.
The ruling, a copy of which can be found here, is being hailed by financial institution trade groups and just as forcefully criticized by consumer groups.
The rule was set to go into effect on May 14. The final rule was put in place by the CFPB on March 5, just a few days ahead of President Biden’s State of the Union address. Analysts on Capitol Hill said the timing was no accident, and the president mentioned the rule and criticized junk fees during the speech.
The lawsuit against the CFPB rule had been filed by the U.S. Chamber of Commerce. Sources told CUToday.info the CFPB had been confident the rule would survive the appeal, but others had said they believed the Bureau was overly confident.
‘Would Not Work’
“Unfortunately, the CFPB wrote a regulation that was not based on any real-world experience,” said John McKechnie, a Hill advocate in Washington for credit unions. “It’s too bad they decided on an approach that simply would not work.”
The court ruling was critical of the timeline of events since the filing of the lawsuit through the day the cap was to go into effect, calling it “hard to follow.” It included the timeline in its ruling as shown here.
The cap has been opposed by America’s Credit Unions as well as banking industry trade groups.
‘Clearly Exceeds Authority’
“We welcome today’s U.S. District Court ruling to pause implementation of the Consumer Financial Protection Bureau’s final rule limiting credit card late fees set to take effect next week,” ABA President Rob Nichols said in a statement. “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. We thank our co-plaintiffs for their collaboration, and we look forward to the Court ultimately ruling on the merits of our case."
‘Will Cost Consumers $27 Million Per Day’
But government watchdog group AccountableUS said the cap would have saved Americans up to $10 billion per year, alleging the “Chamber’s legal obstruction will now cost everyday families across the country roughly $27 million each day the rule is stayed.
“In their latest in a stack of lawsuits designed to pad record corporate profits at the expense of everyone else, the U.S. Chamber got its way for now -- ensuring families get price-gouged a little longer with credit card late fees as high as $41,” said Accountable.US’ Liz Zelnick. “The U.S. Chamber and the big banks they represent have corrupted our judicial system by venue shopping in courtrooms of least resistance, going out of their way to avoid having their lawsuit heard by a fair and neutral federal judge.”
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