Rohit Chopra, director of the Consumer Financial Protection Bureau, speaks during a Senate Banking, Housing and Urban Affairs Committee hearing in Washington, DC, on December 15, 2022.
Ting Shen | Bloomberg | fake images
The U.S. banking industry has won a key victory in its effort to block the implementation of a Consumer Financial Protection Bureau rule that would have sharply limited the fees credit card companies can charge for late payments.
A federal court late Friday approved the industry's last-minute legal effort to pause implementation of a regulation that was announced in March and was set to take effect Tuesday.
In his order, Judge Mark Pittman of the Northern District of Texas sided with the plaintiffs, including the U.S. Chamber of Commerce, in their lawsuit against the CFPB, saying they overcame obstacles by seeking a preliminary injunction to freeze the rule.
The result preserves, at least for now, a key revenue source for the U.S. card industry. The CFPB estimates that the rule would have saved American families $10 billion a year in fees paid by those who fall behind on their bills. It would have capped late payment fees that are normally $32 per incident to $8 each and limited the industry's ability to increase fees.
It is now unclear when, or if, the new regulation will come into effect.
“Consumers will be saddled with $800 million in late fees each month the rule is delayed, money that pads the profit margins of the largest credit card issuers,” a CFPB spokesperson told CNBC on Friday.
The industry's lawsuit is an effort to block a regulation “to continue making tens of billions of dollars in profits by charging borrowers late fees that far exceed their actual costs,” the spokesperson said.
“We are disappointed that a court sided with House Republicans, big banks and special interests to pause a critical measure to save American families billions in junk fees,” White House spokesman Jeremy Edwards said in an email statement. “President Biden is siding with middle-class families in taking on corporate scams. That's why he supports the Consumer Financial Protection Bureau's rule to reduce excessive late payment fees on credit cards.” .
The CFPB has said the industry benefits from borrowers with low credit scores by charging them increasingly higher late penalties over the past decade, while trade groups have argued that caps on fees are a misguided effort that redistributes funds. costs among those who pay their bills on time.
The Consumer Bankers Association, which is one of the groups that sued the CFPB, said it was “pleased with the District Court's decision to grant a preliminary injunction to prevent the credit card late fee rule.” CFPB credit goes into effect next week.
The CBA said it will continue to press the courts on why the CFPB rule should be “scrapped entirely.”
