CFPB’s Credit Card Late Fee Cap Tossed by Judge

A federal judge has thrown out the Consumer Financial Protection Bureau’s (CFPB) late fee cap.

The ruling by U.S. District Judge Mark Pittman came after the bureau agreed with opponents that the rule was illegal, Reuters reported Tuesday (April 15).

Pittman granted a joint request by the regulator and a collection of business and banking groups including the U.S. Chamber of Commerce and American Bankers Association. They had argued that the $8 late fee cap violated the Credit Card Accountability and Disclosure Act of 2009 because it blocked card issuers from charging fees “reasonable and proportional to violations.”

The rule applied to issuers with more than 1 million open accounts unless they could show higher fees were needed to cover their costs.

The banking and business groups filed suit against the rule last year, alleging that the CFPB had exceeded its authority and ignored Congress’ intent that fees be high enough to prevent late payments and compensate card issuers for their costs.

They also contended the rule was unfair to many consumers, because it would force lenders to pass on costs to cardholders who pay their bills on schedule.

The plaintiffs issued a joint statement Tuesday calling Pittman’s order “a win for consumers and common sense,” the Reuters report added.

The late fees cap came as part of the Biden White House’s campaign to crack down on “junk fees.” But since President Donald Trump has taken office, his administration has sought to reverse many of Biden’s regulatory efforts.

Last week, the CFPB said it would no longer prioritize enforcement of a regulation requiring a registry of nonbank financial companies that have broken consumer laws and are subject to federal, state or local government or court orders.

Instead, the bureau said it will continue to focus its enforcement and supervision activities on pressing threats to consumers.

The regulator introduced that rule in June, saying it required covered nonbank companies to register with the CFPB after they’ve been caught violating consumer law and to provide a statement from a senior executive that the company follows any relevant orders.

“Too many American families have been harmed by corporate repeat offenders in a rinse-and-repeat cycle of illegality, where bad actors see fines and penalties as the cost of doing business,” then-CFPB Director Rohit Chopra said at the time. “Throughout our economy, we have seen fraudsters and scam artists get caught in one part of the country and restart their scheme in a new place hoping to not get caught again.”