Federal Judge Blocks Biden’s Credit Card Late Fee Regulation Amidst Legal Battle

Featured & Cover Federal Judge Blocks Biden's Credit Card Late Fee Regulation Amidst Legal Battle

A federal judge in Fort Worth, Texas, issued an injunction on Friday, halting a recent Biden administration regulation that aimed to cap late fees charged by credit card companies at $8.

The ruling by US District Judge Mark T. Pittman, a nominee of former President Donald Trump, granted a preliminary injunction requested by various business and banking entities who contended that the new regulation infringed upon several federal laws.

These entities, spearheaded by the conservative-leaning US Chamber of Commerce, initiated legal action against the Consumer Financial Protection Bureau (CFPB) subsequent to the finalization of the regulation in March. The regulation, slated for implementation on Tuesday, was forecasted by the CFPB to save consumers approximately $10 billion annually by reducing fees from an average of $32.

A preliminary injunction effectively stalls the implementation of the regulation until a hearing can be convened to delve into the case with more depth.

“The credit card lobby’s lawsuit is an attempt to derail a rule that will save families $10 billion each year in order to continue making tens of billions of dollars in profits by charging borrowers late fees that far exceed their actual costs,” stated a spokesperson for the CFPB in a communication with CNN. “Consumers will shoulder $800 million in late fees every month that the rule is delayed — money that pads the profit margins of the largest credit card issuers. We will continue to defend this rule so that working families can stop paying excessive late fees that Congress banned more than a decade ago.”

The US Chamber of Commerce declined to comment in response to CNN’s inquiry.

“It is disappointing that the court has granted this last-ditch effort by the banks to prevent these critical limits on credit card late fees from going into effect next week,” remarked Chuck Bell, advocacy program director for non-profit Consumer Reports. “Credit card companies have been bilking consumers out of billions of dollars in excessive late fees for far too long.”

The regulation, initially proposed in February 2023, forms part of a broader initiative by the Biden administration to eradicate “junk fees,” which are regarded as concealed or deceptive charges imposed on consumers.

The newly established regulation would be applicable to major credit card issuers — those with over 1 million accounts. Such companies account for over 95% of the total outstanding credit card debt, according to the CFPB.

The endeavor to target credit card fees aligns with the Biden administration’s endeavors to alleviate financial strains for numerous Americans. Over the past couple of years, high inflation has caused some borrowers, particularly millennials and individuals with lower incomes, to fall behind on their credit card debt.

Furthermore, the regulation aimed to close a loophole from 2010 that the CFPB alleges has been “exploited” by credit card companies to escalate fees on overdue payments.

Based on a national survey conducted by Consumer Reports and published in September, one out of five American adults disclosed that they had incurred a credit card late fee within the preceding 12 months. Eighty-two percent of respondents expressed support for lowering the maximum late fee.

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