Federal Judge Upholds Order Blocking CFPB’s Cap on Credit Card Late Fees

Earlier this month, federal Judge Mark Pittman of Fort Worth decided to uphold an injunction he issued in May blocking the Consumer Financial Protection Bureau’s (CFPB) $8 cap on credit card late fees. The cap on late fees has been part of the White House’s war on “junk fees,” but it has been largely opposed by banking and business groups.

“Congress assigned the CFPB as an umpire to call balls and strikes on the reasonableness and proportionality of penalty fees,” Pittman said, according to PYMNTS. He said that the fee limit violated the Credit Card Accountability and Disclosure Act, a 2009 law enacted to protect consumers from unfair practices by credit card issuers. The law covered excessive fees, but allowed issuers to impose “penalty” fees when a consumer violated a credit card agreement.

In court, the CFPB argued that the injunction relied on an appeals court ruling that the bureau’s funding structure was unconstitutional, but that decision was ultimately overturned by the U.S. Supreme Court. However, Pittman argued that the regulation could be blocked on other grounds, agreeing with groups like the American Bankers Association and the U.S. Chamber of Commerce.

The CFPB announced its late fee regulation in March, reducing standard late fees from an average of $32 to $8 in most cases. “Today, the credit card industry hauls in more than $14 billion in late fee revenue each year, which our research shows is more than five times the companies’ associated costs,” said CFPB Director Rohit Chopra.

Last month, PYMNTS noted that the future of the CFPB may be uncertain under a Republican administration after Donald Trump was elected president, and weeks later, Trump and the Republican-led Congress revealed they were considering significant changes to the CFPB’s power and funding.