In March, the Consumer Financial Protection Bureau announced that a new federal rule would cap late credit card payment fees at $8 per month, estimating that the change would save American households $10 billion annually.
On Friday, a federal judge in Fort Worth temporarily blocked the rule, siding with lobbyists for banks and credit card companies who argued in a lawsuit that it was unconstitutional.
The regulation should come into force on Tuesday. Now the lobbyists can continue their legal battle in U.S. District Court before Judge Mark T. Pittman, who issued the preliminary injunction.
The consumer agency’s new rule would limit issuers to an $8 fee unless they can prove more money is needed to cover their collection costs. The bureau estimated the rule would apply to more than 95 percent of all outstanding credit card balances.
Back in 2010, the Federal Reserve set itself the goal of significantly limiting late payment interest on credit cards. However, a loophole in their regulation that allowed adjustments for inflation allowed banks and credit card companies to charge an average of $32 a month in late fees, according to the Consumer Bureau.
Announcing the new rule, Rohit Chopra, the bureau’s director, said it would “end the era of large credit card companies hiding behind the excuse of inflation as they raise fees for borrowers and boost their own profits.” President Biden supported the rule, saying: “The American people are tired of being played for idiots.”
Two days later, the U.S. Chamber of Commerce joined the American Bankers Association and the Consumer Bankers Association — whose boards include executives from Bank of America, Capital One, Citibank and JPMorgan Chase — in suing Mr. Chopra and his office. Three Texas business associations are also plaintiffs.
Source link
2024-05-11 00:46:02
www.nytimes.com
