A federal judge in Texas declined to revive a new regulation that would cap credit card late fees at $8 after business lobbyists and banks protested the policy as unconstitutional.
The regulation would prevent card issuers with more than one million users from charging more than $8 for late fees unless they could prove to the Consumer Financial Protection Bureau that they needed the money to cover costs. U.S. District Judge Mark Pittman in Fort Worth issued an injunction in May that barred the rule from taking effect. On Friday, Pittman declined the CFPB's request to lift his order.
The policy would ease the burden on cash-strapped Americans by $800 million in late fees every month, according to The Washington Post. But when the cap was proposed, numerous groups moved swiftly to sue the government, including the U.S. Chamber of Commerce — arguing that sizable late fees were necessary for deterring late payments and ensuring that no “raised costs” fell on credit card users.
Pittman, appointed by President-elect Donald Trump in his first term, said the rule violated the Credit Card Accountability and Disclosure Act, a 2009 law aimed at protecting consumers from unfair practices by card issuers, Reuters reported.
“This ruling is a major win for responsible consumers who pay their credit card bills on time and businesses that want to provide affordable credit,” Maria Monaghan, who serves as counsel for the U.S. Chamber’s Litigation Center, said in a statement.
The late fee cap policy was part of the Biden administration's crackdown on “junk fees,” which included other regulations such as requiring resorts and music services to disclose all fees upfront, mandating airline ticket refunds in case of major delays and requiring all companies to make it as easy to cancel a service as it was to sign up.
The CFPB estimates that without the regulation, Americans will spend more than $56 billion on credit card fees over the next five years, according to Reuters.
