Current:Home > StocksFederal judge blocks White House plan to curb credit card late fees -FinanceAcademy
Federal judge blocks White House plan to curb credit card late fees
View
Date:2025-04-17 07:26:28
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.
Consumer groups blasted the decision, saying it will hurt credit card users across the U.S.
"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," Liz Zelnick of Accountable.US, a nonpartisan advocacy group, said in a statement. "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."
According to consumer advocates that support the CFPB's late-fee rule, credit card issuers hit customers with $14 billion in late-payment charges in 2019, accounting for well over half their fee revenue that year. Financial industry critics say such late fees target low- and moderate-income consumers, in particular people of color.
Despite Pittman's stay on Friday, analysts said the legal fight over late fees is likely to continue, with the case possibly heading to the Supreme Court.
"We believe this opens the door for the CFPB to seek to lift the preliminary injunction if the Supreme Court rules in the coming weeks that Congress properly funded the agency," Jaret Seiberg of TD Cowen Washington Research Group said in a report following the decision. "It is why we believe this is not the end of the fighting over whether the fee cut will take effect before full consideration of the merits of the lawsuit."
—With reporting by CBS News' Alain Sherter
- In:
- Credit Cards
Kate Gibson is a reporter for CBS MoneyWatch in New York.
veryGood! (4)
Related
- Kylie Jenner Shows Off Sweet Notes From Nieces Dream Kardashian & Chicago West
- These farmworkers thought a new overtime law would help them. Now, they want it gone
- Score This Sweat-Wicking Sports Bra With 25,700+ 5-Star Reviews For $17 on Amazon Prime Day 2023
- TikTok’s Favorite Oil-Absorbing Face Roller Is Only $8 for Amazon Prime Day 2023
- Charges tied to China weigh on GM in Q4, but profit and revenue top expectations
- Jennifer Aniston’s Go-To Vital Proteins Collagen Powder and Coffee Creamer Are 30% Off for Prime Day 2023
- I’m Obsessed With Colgate Wisp Travel Toothbrushes and They’re 46% Off on Amazon Prime Day 2023
- After a historic downturn due to the pandemic, childhood immunizations are improving
- Taylor Swift makes surprise visit to Kansas City children’s hospital
- A lesson in Barbie labor economics
Ranking
- $73.5M beach replenishment project starts in January at Jersey Shore
- Turning unused office space into housing could solve 2 problems, but it's tricky
- Kevin Costner Ordered in Divorce Docs to Pay Estranged Wife Christine $129K Per Month in Child Support
- Amid a record heat wave, Texas construction workers lose their right to rest breaks
- Moving abroad can be expensive: These 5 countries will 'pay' you to move there
- 3 lessons past Hollywood strikes can teach us about the current moment
- Wes Moore Names Two Members to Maryland Public Service Commission
- Finding the Antidote to Climate Anxiety in Stories About Taking Action
Recommendation
Juan Soto to be introduced by Mets at Citi Field after striking record $765 million, 15
Finally, Some Good Climate News: The Biggest Wins in Clean Energy in 2022
Three Midwestern States to Watch as They Navigate Equitable Rollout for EV Charging
Car Companies Are Now Bundling EVs With Home Solar Panels. Are Customers Going to Buy?
Trump issues order to ban transgender troops from serving openly in the military
Why Patrick Mahomes Says Wife Brittany Has a “Good Sense” on How to Handle Online Haters
Army Corps of Engineers Withdraws Approval of Plans to Dredge a Superfund Site on the Texas Gulf Coast for Oil Tanker Traffic
Carbon Removal Is Coming to Fossil Fuel Country. Can It Bring Jobs and Climate Action?