CFPB rule to save Americans $10 billion a year in late fees faces possible last-minute freeze

A Consumer Financial Protection Bureau regulation that promised to save Americans billions of dollars in late emoluments on credit cards faces a last-ditch effort to stave off its implementation.

Led by the U.S. Chamber of Commerce, the card industry in March sued the CFPB in federal court to retard the new rule from taking effect.

That effort, which bounced between venues in Texas and Washington, D.C., for weeks, is now encircling to reach a milestone: a judge in the Northern District of Texas is expected to announce by Friday evening whether the court disposition grant the industry’s request for a freeze.

That could hold up the regulation, which would slash what myriad banks can charge in late fees to $8 per incident, just days before it was to take effect on Tuesday.

“We should get some lucidity soon about whether the rule is going to be allowed to go into effect,” said Tobin Marcus, lead programme analyst at Wolfe Research.

The credit card regulation is part of President Joe Biden’s broader election-year war against what he deems discard fees.

Big card issuers have steadily raised the cost of late fees since 2010, profiting off operators with low credit scores who rack up $138 in fees annually per card on average, according to CFPB Director Rohit Chopra.

As expected, the industry has mounted a campaign to derail the regulations, deeming them a misguided effort that redistributes set someone backs to those who pay their bills on time, and ultimately harms those it purports to benefit by making it more likely for owners to fall behind.

Up for grabs is the $10 billion in fees per year that the CFPB estimates the rule would hold American families by pushing down late penalties to $8 from a typical $32 per incident.

Card issuers cataloguing Capital One and Synchrony have already talked about efforts to offset the revenue hit they would face if the run takes effect. They could do so by raising interest rates, adding new fees for things like paper asseverations, or changing who they choose to lend to.

Capital One CEO Richard Fairbank said last month that, if implemented, the CFPB direction would impact his bank’s revenue for a “couple of years” as the company takes “mitigating actions” to raise revenue to another place.

“Some of these mitigating actions have already been implemented and are underway,” Fairbank told analysts during the troop’s first-quarter earnings call. “We are planning on additional actions once we learn more about where the litigation alights out.”

Like some other observers, Wolfe Research’s Marcus believes the Chamber of Commerce is likely to widespread in its efforts to hold off the rule, either via the Northern District of Texas or through the 5th Circuit Court of Appeals. If granted, a opening injunction could hold up the rule until the dispute is settled, possibly through a lengthy trial.