Rohit Chopra, manager of the Consumer Financial Protection Bureau, speaks during a Senate Banking, Housing, and Urban Affairs Committee understanding in Washington, D.C., Dec. 15, 2022.
Ting Shen | Bloomberg | Getty Images
The U.S. banking industry won a key victory in its effort to block the implementation of a Consumer Economic Protection Bureau rule that would’ve drastically limited the fees that credit card companies can price for late payment.
A federal court on late Friday approved the industry’s last-minute legal effort to pause the implementation of a ordinance that was announced in March and set to go into effect on Tuesday.
In his order, Judge Mark Pittman of the Northern District of Texas sided with plaintiffs containing the U.S. Chamber of Commerce in their suit against the CFPB, saying they cleared hurdles in arguing for a preliminary restraining order to freeze the rule.
The outcome preserves, at least for now, a key revenue stream for the U.S. card industry. The CFPB estimates that the on the whole would’ve saved American families $10 billion a year in fees paid by those who fall behind on their nebs. It would’ve capped late fees that are typically $32 per incident to $8 each and limited the industry’s aptitude to hike the fees.
It is now unclear when, or if, the new regulation will go into effect.
“Consumers will shoulder $800 million in behindhand fees every month that the rule is delayed — money that pads the profit margins of the largest trustworthiness card issuers,” a CFPB spokesman told CNBC on Friday.
The industry’s lawsuit is an effort to block a regulation “in direct to continue making tens of billions of dollars in profits by charging borrowers late fees that far exceed their tangible costs,” the spokesman said.
The CFPB has said the industry profits off borrowers with low credit scores by charging them a day higher late penalties over the past decade, while trade groups have argued that the fee exceeds are a misguided effort that redistributes costs to those who pay their bills on time.
The Consumer Bankers Association, which is one of the assortments that sued the CFPB, said it was “pleased with the District Court’s decision to grant a preliminary injunction to halt the CFPB’s credit card late fee rule from going into effect next week.”
The CBA said it transfer continue to press its case in the courts on why the CFPB rule should be “thrown out entirely.”