A federal judge in Texas suspended on Friday (10) the new rule from the Consumer Financial Protection Bureau (CFPB) that limits late credit card fees to $8, a victory for business and banking groups challenging the Biden administration’s crackdown on so-called “junk fees.”
The U.S. District Judge, Mark Pittman, in Fort Worth, issued a temporary injunction preventing the rule from taking effect this Tuesday (14). The injunction was requested by groups such as the U.S. Chamber of Commerce and the American Bankers Association.
Pittman, a judge appointed by then-Republican President Donald Trump, cited a 2022 decision from the 5th Circuit Court of Appeals, based in New Orleans, which deemed the CFPB’s funding structure unconstitutional.
“Consequently, any regulations promulgated under this regime are likely unconstitutional as well,” Pittman wrote. “Thus, the Petitioners establish a likelihood of success on the merits.”
The CFPB’s funding structure is currently under review by the U.S. Supreme Court.
The new rule has the support of President Joe Biden. White House spokesperson Jeremy Edwards, in a statement, called the decision disappointing, saying that the CFPB’s rule is “a critical measure to save billions for American families in undue fees.”
The CFPB adopted the rule to counter what it called “excessive” fees that credit card issuers charge for late payments.
The rule would prevent issuers with more than 1 million open accounts from charging more than $8 for late fees unless they could prove that higher fees are necessary to cover their costs.
According to the CFPB, credit card issuers charged more than $14 billion in late fees in 2022, with an average fee of $32.
Source: Reuters