A federal judge in Fort Worth, Texas, blocked a new Biden administration rule that would limit credit card companies from charging customers late fees higher than $8. US District Judge Mark T. Pittman granted a preliminary injunction to several business and banking organizations that argue the rule violates federal statutes. The rule, set to save consumers about $10 billion per year by reducing fees from an average of $32, was scheduled to take effect on Tuesday. The preliminary injunction halts the rule’s implementation until a hearing can be held to further consider the case.
The Consumer Financial Protection Bureau, being sued by several organizations led by the US Chamber of Commerce, expressed disappointment in the court’s decision to delay the rule. The CFPB spokesperson mentioned that consumers will continue to pay excessive late fees while the rule is delayed, benefitting the profit margins of large credit card issuers. The US Chamber of Commerce has not responded to requests for comment. Chuck Bell, advocacy program director for Consumer Reports, criticized credit card companies for charging excessive late fees and called for the implementation of the rule to protect consumers.
The rule, proposed in February 2023, is part of the Biden administration’s effort to eliminate “junk fees” that are hidden or misleading to consumers. It would only apply to large credit card issuers with more than 1 million accounts, which represent over 95% of total outstanding credit card debt. This move is in response to the financial burdens faced by many Americans, particularly millennials and those with lower incomes who have struggled with credit card debt due to high inflation in recent years. The rule also aims to close a loophole from 2010 that credit card companies have exploited to increase late payment fees.
An earlier survey conducted by Consumer Reports revealed that one in five American adults had paid a credit card late fee in the previous 12 months, prompting support from 82% of respondents to lower the maximum late fee. The Biden administration’s push to reduce credit card fees aligns with broader efforts to address financial challenges faced by Americans. The administration’s focus on easing financial burdens for consumers is reflected in this rule, which aims to protect borrowers from excessive fees charged by credit card companies. Despite the legal setback, the administration remains committed to defending the rule and ensuring that working families can benefit from the cost-saving measures it provides.
