Rohit Chopra, director of the Consumer Financial Protection Bureau, speaks at a hearing of the Senate Banking, Housing and Urban Affairs Committee in Washington, DC, December 15, 2022.
Ting Shen | Bloomberg | Getty Images
The US banking industry has won a key victory in its efforts to block implementation. Consumer Financial Protection Bureau A rule that would sharply limit the fees that credit card companies can charge for late payments.
Federal Court on Friday evening approved a last-minute legal attempt by the industry to halt implementation of a regulation that was announced in March and set to take effect Tuesday.
In his orderJudge Mark Pittman of the Northern District of Texas sided with the plaintiffs, including the U.S. Chamber of Commerce, in their lawsuit against the CFPB, saying they had cleared the odds in arguing for a preliminary injunction to freeze the rule.
The result retains, at least for now, a key source of revenue for the US card industry. CFPB estimates this rule would save American families 10 billion dollars year in the form of fees paid by those who are behind on their bills. It would limit late fees, which are typically $32 per incident, to $8 each, and would also limit the industry’s ability to raise fees.
It is unclear when or if the new regulation will go into effect.
“Consumers will incur $800 million in late fees each month if the rule is delayed—money that boosts profits for the largest credit card issuers,” a CFPB spokesperson told CNBC on Friday.
The industry’s lawsuit is an attempt to block regulation “to continue to make tens of billions of dollars in profits by charging borrowers late fees that far exceed their actual costs,” the spokesman said.
The CFPB has said The industry has profited from borrowers with low credit scores by charging them increasingly high late fees over the past decade, while trade groups argue that fee caps are a misguided effort that redistributes costs for those who pay their bills on time.
The Consumer Bankers Association, which is one of the groups suing the CFPB, said it was “pleased by the district court’s decision to issue a preliminary injunction to prevent the CFPB’s credit card late penalty rule from taking effect next week.”
CBA said it will continue to argue in the courts why the CFPB rule should be “overturned entirely.”