CFPB rule may be frozen

A Consumer Financial Protection Bureau regulation that promised To save Americans billions of dollars in credit card late fees, there is a last-ditch effort to prevent it from happening.

Under the direction of US Chamber of Commercecard industry in March sued The CFPB went to federal court to prevent the new rule from going into effect.

The effort that bounced off between sites in Texas and Washington, D.C., over the course of several weeks, is now approaching a major milestone: A judge in the Northern District of Texas is expected to announce by Friday evening whether the court will grant the industry’s request for a freeze.

That could delay a regulation that would have slashed the amount most banks can charge for late payments to $8 per incident, just days before it was due to take effect. come into force on Tuesday.

“We should have some clarity soon as to whether this rule will go into effect,” he said. Tobin MarcusLead Policy Analyst at Wolfe Research.

The credit card regulation is part of President Joe Biden’s broader election-year war against what he views as junk fees.

Major card issuers have been steadily increasing the cost of late fees since 2010, profiting from users with low credit scores who average $138 per card annually. according to CFPB Director Rohit Chopra.

As expected, the industry launched a campaign to undermine the rules as a misguided effort that redistributes costs to those who pay their bills on time, and ultimately harms those it is intended to benefit, making users more likely to fall behind.

Available for sale 10 billion dollars The CFPB estimates the rule will save American families by reducing late fees to $8 from the typical $32 per incident.

Card issuers, including Capital One And Synchronicity have already talked about trying to offset the revenue hit they would face if the rule went into effect. They could do this by raising interest rates, adding new fees for things like paper statements, or changing who they choose to lend to.

Capital One CEO Richard Fairbank said last month that if implemented, the CFPB rule would impact his bank’s earnings for a “couple of years” as the company takes “mitigating actions” to boost earnings elsewhere.

“Some of these mitigation measures have already been implemented and are underway,” Fairbank told analysts during the company’s first-quarter earnings call. “We plan to take additional action once we learn more about how the litigation will end.”

Like some another As observers, Marcus of Wolfe Research believes the Chamber of Commerce will likely prevail in its efforts to overturn the rule, either through the Northern District of Texas or the 5th Circuit Court of Appeals. If granted, a preliminary injunction could suspend the rule until the dispute is resolved, possibly through lengthy litigation.

The industry group, which includes Washington-based trade associations such as the American Bankers Association and the Consumer Bankers Association, filed the lawsuit in Texas because it is widely seen as a friendlier place for corporations, Marcus said.

“I would be very surprised if [Texas Judge Mark T.] Pittman denies this ban on the merits,” he said. “One way or another, I think implementation will be blocked before the rule is supposed to take effect.”

The CFPB declined to comment, and the Chamber of Commerce did not immediately respond to a request for comment.