CFPB Scraps Credit Card Late Fee Rule

The Consumer Financial Protection Bureau (CFPB) has chosen to abandon its rule imposing an $8 limit on credit card late fees, according to a consent judgment motion filed this week. The agency and other industry groups like the American Bankers Association agreed that the rule violated the 2009 CARD Act, which allows credit card issuers to charge penalties.

In March 2024, the CFPB finalized its late fee cap as part of the Biden administration’s efforts to crack down on “junk fees,” which prompted the industry groups’ suit just days later, where they argued that the CFPB exceeded its authority and depended on faulty economic analysis. The groups requested that the U.S. District Court for the Northern District of Texas toss the late fee rule.

According to Bloomberg Law, Judge Mark T. Pittman tried to transfer the case to the U.S. District Court for the District of Columbia, but the U.S. Court of Appeals for the Fifth Circuit sent it back to his court twice. Pittman then denied a CFPB bid in December to dismiss all claims.

Last month, the Bureau said in a status report that they felt the parties could reach an agreement, and requested that Pittman stay all pending deadlines while they continued to resolve the case. The consent judgment noted that the CFPB should have factored in the deterrence of late fees when determining the cap.

Employees at the Bureau lost some protections with the Trump administration’s planned reductions in force, as an appeal panel partially stayed an order to stop the mass firings at the CFPB. Agency leaders can fire workers or subject them to a reduction in force upon an “particularized” or “individualized” assessment.

Earlier today, Judge Pittman allowed the dismissal, saying the rule violated the Credit Card Accountability and Disclosure Act of 2009 because it failed to allow card issuers to “charge penalty fees reasonable and proportional to violations.”