Rohit Chopra, Director of the Consumer Financial Protection Bureau, speaks during a hearing of the Senate Banking, Housing and Urban Affairs Committee on December 15, 2022 in Washington, DC.
Ting Shen | Bloomberg | Getty Images
The U.S. banking sector won a key victory in its efforts to block 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 short-term legal effort to suspend implementation of a regulation announced in March that was set to take effect Tuesday.
In his order, Judge Mark Pittman of the Northern District of Texas sided with the plaintiffs, including the U.S. Chamber of Commerce in their lawsuit against the CFPB, saying they had overcome all hurdles by seeking an injunction freezing the regulation pleaded.
The result secures, at least for now, an important source of revenue 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 fall behind on their bills. That would have capped late fees, typically $32 per incident, at $8 each and limited the industry’s ability to increase fees.
It is currently unclear when and whether the new regulation will come into force.
“Consumers will have to pay $800 million in late fees every month the rule is delayed – money that pads the profit margins of the largest credit card issuers,” a CFPB spokesperson told CNBC on Friday.
The industry’s lawsuit is an attempt to block regulation “to continue making 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 profiting from borrowers with low credit scores by charging them increasingly high late payment rates over the past decade, while trade groups argued that the fee caps are a misguided measure 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 by the district court’s decision to issue a preliminary injunction to prevent the CFPB’s credit card late fee rule from taking effect next week.” “
The CBA said it will continue to press the courts why the CFPB rule should be “totally thrown out.”
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2024-05-10 23:35:49
www.cnbc.com
