Rohit Chopra, director of the Consumer Financial Protection Bureau, speaks during a Senate Banking, Housing, and Urban Affairs Committee hearing in Washington, D.C., on December 15, 2022.
Ting Shen | Bloomberg | Getty Images
The U.S. banking industry has scored a major victory in its effort to block the implementation of a Consumer Financial Protection Bureau rule that would have sharply limited the fees credit card companies can charge for late payments.
A federal court late Friday approved the industry's last-minute legal effort to halt implementation of the regulation that was announced in March and is scheduled to take effect on Tuesday.
In his order, Judge Mark Bittman of the Northern District of Texas sided with the plaintiffs including the U.S. Chamber of Commerce in their suit against the CFPB, saying they had cleared hurdles in seeking a preliminary injunction to freeze the rule.
The result, at least for now, maintains a major revenue source for the US card industry. The CFPB estimates that the rule would have saved American families $10 billion annually in fees paid by those who default on their bills. Late fees that typically amount to $32 per incident would have been capped at $8 per incident, limiting the industry's ability to raise fees.
It is now unclear when or if the new regulation will come into effect.
“Consumers will incur $800 million in late fees every month that the rule is delayed — money that supports the profit margins of the largest credit card issuers,” a CFPB spokesperson told CNBC on Friday.
The industry's lawsuit is an attempt to obstruct regulation “in order to continue to make tens of billions of dollars in profits by charging borrowers late fees that far exceed their actual costs,” the spokesman said.
The CFPB said the industry is taking advantage of borrowers with low credit scores by imposing late fees that are higher than at any time over the past decade, while trade groups have argued that the fee caps are a misguided effort that redistributes costs to those who pay their bills on time.
The Consumer Bankers Association, one of the groups that sued the CFPB, said it was “pleased with the district court's decision to grant a preliminary injunction to stop the CFPB's credit card late fee rule going into effect next week.”
The CBA said it will continue to press its case in the courts on why the CFPB rule should be “repealed in its entirety.”
