A federal decide in Texas has blocked a brand new authorities rule that may slash bank card late-payment fees, a centerpiece of the Biden administration’s efforts to clamp down on “junk” charges.
Decide Mark Pittman of the U.S. District Court docket for the Northern District of Texas on Friday granted an injunction sought by the banking trade and different enterprise pursuits to freeze the restrictions, which have been scheduled to take impact on Could 14.
In his ruling, Pittman cited a 2022 choice by the U.S. Court docket of Appeals for the Fifth Circuit that discovered that funding for the Client Monetary Safety Bureau (CFPB), the federal company set to implement the bank card rule, is unconstitutional.
The rules, adopted by the CFPB in March, search to cap late charges for bank card funds at $8, in contrast with present late charges of $30 or extra. Though a bane for customers, the charges generate about $9 billion a 12 months for card issuers, in accordance with the company.
After the CFPB on March 5 introduced the ban on what it referred to as “extreme” bank card late charges, the American Bankers Affiliation (ABA) and U.S. Chamber of Commerce filed a authorized problem.
The ABA, an trade commerce group, applauded Pittman’s choice.
“This injunction will spare banks from having to right away adjust to a rule that clearly exceeds the CFPB’s statutory authority and can result in extra late funds, decrease credit score scores, elevated debt, diminished credit score entry and better APRs for all customers — together with the overwhelming majority of card holders who pay on time every month,” ABA CEO Rob Nichols mentioned in an announcement.
Client teams blasted the choice, saying it’ll damage bank card customers throughout the U.S.
“Of their newest in a stack of lawsuits designed to pad file company income on the expense of everybody else, the U.S. Chamber obtained its method for now, making certain households get price-gouged slightly longer with bank card late charges as excessive as $41,” Liz Zelnick of Accountable.US, a nonpartisan advocacy group, mentioned in an announcement. “The U.S. Chamber and the large banks they signify have corrupted our judicial system by venue purchasing in courtrooms of least resistance, going out of their option to keep away from having their lawsuit heard by a good and impartial federal decide.”
In accordance with shopper advocates that help the CFPB’s late-fee rule, bank card issuers hit prospects with $14 billion in late-payment fees in 2019, accounting for properly over half their payment income that 12 months. Monetary trade critics say such late charges goal low- and moderate-income customers, particularly individuals of shade.
Regardless of Pittman’s keep on Friday, analysts mentioned the authorized struggle over late charges is more likely to proceed, with the case probably heading to the Supreme Court docket.
“We consider this opens the door for the CFPB to hunt to carry the preliminary injunction if the Supreme Court docket guidelines within the coming weeks that Congress correctly funded the company,” Jaret Seiberg of TD Cowen Washington Analysis Group mentioned in a report following the choice. “It’s why we consider this isn’t the top of the preventing over whether or not the payment lower will take impact earlier than full consideration of the deserves of the lawsuit.”
—With reporting by CBS Information’ Alain Sherter
