Splitit Redefining Retail May 2024 Banner

Federal Judge Blocks CFPB Rule Limiting Credit Card Late Fees

The government’s new rule that would limit credit card late fees has been blocked by a federal judge in Texas.

In a Friday (May 10) decision, Judge Mark Pittman of the U.S. District Court for the Northern District granted an injunction that halts the restrictions. 

The restrictions had been adopted by the Consumer Financial Protection Bureau (CFPB) and were set to take effect Tuesday (May 14), according to the report.

The injunction blocking these restrictions had been requested by the banking industry and other business interests, per the report.

When issuing the injunction, Pittman cited a 2022 court ruling that found the CFPB’s funding structure unconstitutional.

“Consequently, any regulations promulgated under that regime are likely unconstitutional as well. Thus, Plaintiffs establish a likelihood of success on the merits,” Pittman wrote in his ruling. 

A CFPB spokesperson told Reuters Friday that the agency will keep defending the rule, adding: “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.”

One of the plaintiffs in the case seeking the injunction, the Consumer Bankers Association, said Friday that it is pleased with the decision.

“As we have long said, this is a politically-motivated rule that the White House admits it is pushing because it polls well,” Lindsey Johnson, president and CEO of the Consumer Bankers Association, said in a Friday press release. “We continue to look forward to making our case in District Court on why this ill-advised rule should be thrown out entirely.”

The CFPB’s rules change would lower the typical late fees charged by card issuers from an average of $32 to — in most cases — $8.

The lawsuit challenging these limits was filed against the CFPB and was brought by the U.S. Chamber of Commerce, the American Bankers Association, the Consumer Bankers Association and several Texas industry groups.

The U.S. Court of Appeals for the Fifth Circuit ruled April 5 that the suit would be heard in Texas, reversing an earlier decision by Pittman to move the case to Washington, D.C.