A federal judge in Texas has temporarily halted the Biden administration’s plan to cut late fees on credit cards to $8, which was set to take effect next week.
The temporary nationwide injunction, issued by Judge Mark Pittman in the Northern District of Texas, is a victory for the big banks and major credit card companies that collect billions in revenue each year in late fees and are seeking to stop the proposal from going into effect. It’s also a victory for the U.S. Chamber of Commerce, which led the lawsuit on behalf of the banks.
New rules proposed by the Consumer Financial Protection Bureau would establish $8 cap on most credit card late fees or require banks to show why they should charge more than $8 for such a fee.
This rule will reduce the average credit card late fee from $32. The bureau estimates that banks generate about $14 billion in credit card late fees per year.
White House spokesman Jeremy Edwards said in a statement Friday night: “We are disappointed that the Court sided with House Republicans, big banks and special interests in halting passage of a critical measure that would save billions of American families in garbage fees.”
Earlier this year, Banks filed a motion to have the lawsuit dismissed, but they hit a roadblock when Pittman ordered the case moved to Washington, D.C., due to few banks operating in North Texas. However, the appeals court overturned much of Pittman’s decision and ordered him to rule on the bank’s request for an injunction.
While Pittman did grant the injunction, he used much of his ruling to chastise the Fifth Circuit Court of Appeals for sending the case back to it after it had already ruled that the case should be tried outside of Washington. Critics of the lawsuit called the case another example of judicial “forum selection,” in which a company files a lawsuit in a friendly area to have a better chance of getting a favorable decision.
As part of his re-election campaign, President Joe Biden has tried to highlight his administration’s push to curb so-called “junk fees,” which are bank fees such as late fees, ATM fees and overdraft fees.
“Every month the credit card late fee rule is blocked will cost Americans more than $800 million,” the White House said Friday.
Banks viewed the campaign as a political battle against their business model, while consumer advocates viewed these bank fees as excessive given the level of risk banks and credit card companies were taking on.
“In its latest in a series of lawsuits aimed at boosting record corporate profits at the expense of everyone else, the US House of Representatives has now achieved its goal – ensuring that families will be jacked up a little more with credit card late fees as high as $41. said Liz Zelnick of Accountable.US.