CFPB Loses Bid to Reinstate Cap on Credit Card Late Fees

A federal judge has upheld an order blocking a cap on credit card late fees.

U.S. District Judge Mark Pittman in Fort Worth declined last week to dissolve an injunction he issued in May to block the Consumer Financial Protection Bureau’s (CFPB) $8 limit on late fees, Reuters reported Friday (Dec. 6).

The limit — part of the White House’s largest war on “junk fees” — has been opposed by banking and business groups.

According to Reuters, the CFPB had argued in court that the injunction rested entirely on an appeals court ruling that declared the regulator’s funding structure unconstitutional, a decision ultimately overturned by the U.S. Supreme Court.

However, Pittman agreed with groups like the U.S. Chamber of Commerce and the American Bankers Association, who had challenged the fee cap, and who argued the regulation could still be blocked on other grounds.

Pittman, appointed during the first Trump administration, said the fee cap violated the Credit Card Accountability and Disclosure Act, a 2009 U.S. law aimed at protecting consumers from unfair practices by card issuers.

That law covered excessive fees but let card issuers to impose “penalty” fees when a customer violated a credit card agreement, including by failing to make payments on time.

“Congress assigned the CFPB as an umpire to call balls and strikes on the reasonableness and proportionality of penalty fees,” Pittman said.

But in barring card issuers from imposing penalty fees, the CFPB without permission “established a strike-zone only large enough for pitches right down the middle,” Pittman wrote.

A CFPB spokesperson told Reuters the judge’s ruling “allows big banks to extract $27 million in excessive late fees from American families every single day.”

The bureau announced its cap on late fees in March, reducing the typical late fees charged by card issuers from an average of $32 to, in most cases, $8.

“Today, the credit card industry hauls in more than $14 billion in late fee revenue each year, which our research shows is more than five times the companies’ associated costs,” CFPB Director Rohit Chopra said at the time.

As PYMNTS wrote last month after Donald Trump was elected to a second, nonconsecutive term, the future of the CFPB might be uncertain under a new, Republican administration.

Weeks later, the Washington Post reported that Trump and the Republican-led Congress were considering sweeping changes to the CFPB, hoping to curtail the agency’s power and funding.