A federal judge in Texas has temporarily stopped the Consumer Financial Protection Bureau’s (CFPB) new rule, which would have limited credit card late fees to $8. 

This decision is a victory for business and banking groups who challenged the Biden administration’s efforts to reduce “junk fees.” 

The U.S. Chamber of Commerce and the American Bankers Association sought the ruling, which would prevent the rule from taking effect next week.

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• The federal judge temporarily blocks CFPB’s $8 cap on late credit card fees.

• Ruling favors business and banking groups challenging Biden administration’s “junk fees” crackdown.

• Supreme Court will review the constitutionality of CFPB’s funding structure, which will impact future consumer protection regulations.

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US Judge Blocks CFPB’s Rule Limiting Credit Card Late Fees to $8

Judge Pittman, a Trump appointee, based his decision on a 2022 ruling by the 5th U.S. Circuit Court of Appeals that found the CFPB’s funding structure unconstitutional. 

He argued that any regulations created under that regime are also likely unconstitutional.

The U.S. Supreme Court is currently reviewing the 2022 ruling, and during recent oral arguments, the justices appeared skeptical of upholding it. 

However, Judge Pittman is still bound by the ruling as his court falls under the 5th Circuit’s jurisdiction.

Maria Monaghan, counsel to the U.S. Chamber of Commerce Litigation Center, hailed the decision as a “major win” for responsible consumers who pay their credit card bills on time and businesses seeking to provide affordable credit. 

On the other hand, a CFPB spokesperson emphasized that the regulator will continue to defend the rule, noting that consumers will face $800 million in late fees every month the rule is delayed, money that “pads the profit margins of the largest credit card issuers.”

The CFPB’s rule, which has the backing of President Joe Biden, aimed to combat “excessive” fees charged by credit card issuers for late payments. 

According to CFPB data, issuers collected over $14 billion in credit card late fees in 2022, with an average fee of $32.

The legal battle over the rule has been ongoing since March, when business and banking groups filed a lawsuit to block its implementation. 

The case experienced a jurisdictional back-and-forth, with Judge Pittman initially transferring it to Washington, D.C., before a 5th Circuit panel dominated by Trump appointees reversed that decision and set a May 10 deadline for Pittman to issue an injunction.

In his order, Judge Pittman expressed concern over the 5th Circuit’s rulings in the case and maintained his belief that a judge in Washington could have issued a “just and fair” ruling. 

However, he emphasized the importance of trusting the legal system.

As the fate of the CFPB’s rule remains uncertain, the outcome of this legal battle will have significant implications for both consumers and the financial industry. 

The Supreme Court’s decision on the constitutionality of the CFPB’s funding structure will play a crucial role in determining the future of this and other regulations aimed at protecting consumers from excessive fees.

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