A federal judge on Friday temporarily blocked the U.S. government from trying to limit credit card late fees, siding with banks and other business lobbyists that had challenged the policy as unconstitutional.
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The cap on penalties was set to take effect next week, but the new ruling from U.S. District Judge Mark T. Pittman, nominated by President Donald Trump in 2019, would block swift financial relief for millions of Americans who have fallen behind on their bills.
Under the contested policy, the Consumer Financial Protection Bureau sought to restrict most penalties for late or missed credit card payments to $8 per month, unless banks could point to data showing that they needed to charge more to make up for their financial losses.
The regulations aimed to close a loophole in federal law that had allowed some companies to charge an average of $32 a month in late fees, enriching an industry that reaped $14 billion in such payments in 2022, the CFPB found.
“The American people are tired of being played for suckers,” President Biden said in March as the agency unveiled its plans.
But major banks and credit card companies sharply opposed any limits on what they could charge late borrowers. After an unsuccessful, year-long lobbying campaign to deter the CFPB, the U.S. Chamber of Commerce joined bank lobbyists and other groups in suing the government this spring, stressing that fees are essential for “deterring late payments.”
On Friday, Pittman granted those lobbying groups’ requests, temporarily halting a policy that would have taken effect May 14. The decision in the Northern District of Texas marked a major early win for Bank of America, Capital One, Citibank and JPMorgan Chase, whose executives serve on the boards of directors for the organizations that sued the government, including the American Bankers Association and the Consumer Bankers Association.
The temporary injunction buys more time for the two sides to argue over the merits of the rules in court. The battle already has been mired in politics and controversy, amid ethics complaints about judges’ stock holdings and fights within the judicial system over who should have the authority to review the case in the first place.
The decision comes as the future of the CFPB itself remains unsettled, hinging on a pivotal Supreme Court case challenging the agency’s funding that is expected to be decided in the coming weeks.
Get a curated selection of 10 of our best stories in your inbox every weekend.
The cap on penalties was set to take effect next week, but the new ruling from U.S. District Judge Mark T. Pittman, nominated by President Donald Trump in 2019, would block swift financial relief for millions of Americans who have fallen behind on their bills.
Under the contested policy, the Consumer Financial Protection Bureau sought to restrict most penalties for late or missed credit card payments to $8 per month, unless banks could point to data showing that they needed to charge more to make up for their financial losses.
The regulations aimed to close a loophole in federal law that had allowed some companies to charge an average of $32 a month in late fees, enriching an industry that reaped $14 billion in such payments in 2022, the CFPB found.
“The American people are tired of being played for suckers,” President Biden said in March as the agency unveiled its plans.
But major banks and credit card companies sharply opposed any limits on what they could charge late borrowers. After an unsuccessful, year-long lobbying campaign to deter the CFPB, the U.S. Chamber of Commerce joined bank lobbyists and other groups in suing the government this spring, stressing that fees are essential for “deterring late payments.”
On Friday, Pittman granted those lobbying groups’ requests, temporarily halting a policy that would have taken effect May 14. The decision in the Northern District of Texas marked a major early win for Bank of America, Capital One, Citibank and JPMorgan Chase, whose executives serve on the boards of directors for the organizations that sued the government, including the American Bankers Association and the Consumer Bankers Association.
The temporary injunction buys more time for the two sides to argue over the merits of the rules in court. The battle already has been mired in politics and controversy, amid ethics complaints about judges’ stock holdings and fights within the judicial system over who should have the authority to review the case in the first place.
The decision comes as the future of the CFPB itself remains unsettled, hinging on a pivotal Supreme Court case challenging the agency’s funding that is expected to be decided in the coming weeks.
