FT. WORTH, Texas–A lawsuit has been filed against the Consumer Financial Protection Bureau over its new rule capping late fees on credit cards at $8. The plaintiffs allege the rule punishes consumers who pay their bills on time.
The CFPB further argues the Bureau is exceeding its authority and ignoring Congress' intent that fees be “high enough to deter late payments, ensure cardholder accountability, and compensate issuers for their costs when payments are late.”
Plaintiffs in the case include the U.S. Chamber of Commerce, the American Bankers Association, the Consumer Bankers Association, and trade groups in Texas.
In response, the CFPB told Reuters it will defend the proposal—which is also opposed by credit unions—saying it "closes a longstanding loophole abused by credit card giants to turn late fees into a major revenue stream," and will save American consumers more than $10 billion.
Why CUs are Objecting
As CUToday.info has reported, the new rule caps the fee for issuers of more than one-million accounts, which currently applies to Navy Federal Credit Union only. But credit unions and their trade groups are arguing that ultimately it will affect all issuers, because the largest of issuers can afford the lower fee income and it will create new competition for smaller players.
More than 95% of outstanding credit card balances are expected to be covered.