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By Mae Slater on
 May 12, 2024

Biden-Proposed Credit Card Fee Cap Blocked By Trump-Appointed Judge

A recent court ruling has paused a federal initiative aimed at lowering credit card late fees significantly.

The Hill reported that a Texas judge has temporarily halted a Biden administration rule that would have slashed credit card late fees to $8, a move projected to save consumers billions.

The preliminary injunction was issued by US District Judge Mark T. Pittman, appointed by former President Donald Trump.

This decision came as a result of a lawsuit spearheaded by the U.S. Chamber of Commerce, challenging the Consumer Financial Protection Bureau's (CFPB) new regulation.

A Legal Challenge to Consumer Financial Protection

The rule, set to implement major reductions in late fees—from the current average of $32 down to $8—was finalized by the CFPB in early March. It aimed to alleviate the financial strain on Americans, particularly exacerbated by recent inflation spikes.

Judge Pittman's ruling prevents the rule from taking effect next week, as originally planned. The CFPB had estimated that the change would benefit over 45 million individuals who face late fees annually.

These consumers were expected to save an average of $220 per year, summing up to more than $10 billion in annual late fee savings.

Maria Monaghan, Counsel at the U.S. Chamber of Commerce Litigation Center, hailed the decision as a victory. She argued that the rule would have unfairly penalized businesses and consumers who manage their credit responsibly. "This ruling is a major win for responsible consumers who pay their credit card bills on time and businesses that want to provide affordable credit," Monaghan stated.

She further criticized the CFPB's approach as overreach. "The CFPB’s attempted micromanagement would have raised costs for most credit card users and made it harder for businesses to meet consumers’ needs," Monaghan added.

Continued Legal Opposition to Regulatory Changes

The U.S. Chamber of Commerce has expressed its commitment to continue its legal challenges against the CFPB, ensuring that the bureau's regulatory actions do not go unchecked. "The U.S. Chamber will continue to hold the CFPB accountable in court," Monaghan remarked.

This legal battle underscores the ongoing tensions between regulatory attempts to protect consumers and the interests of business groups. The halted rule was a key part of the Biden administration’s broader strategy to reduce financial burdens on Americans.

With the injunction now in place, the future of this rule and its intended benefits for millions of Americans hangs in the balance, pending further legal proceedings.

The court’s decision to halt the implementation of the $8 late fee cap poses significant questions about the balance of regulatory influence and the autonomy of financial institutions in setting their fees.

This judicial intervention may set a precedent for how similar regulations are treated in the courts, indicating a challenging road ahead for the CFPB under the current administration.

As the legal proceedings continue, stakeholders from all sides will be closely watching the developments, which could have wide-reaching implications for the financial sector and its consumers.

Summary of Key Points and Future Considerations

In conclusion, the injunction against the CFPB’s rule to reduce credit card late fees marks a significant development in the ongoing debate between consumer protection and business interests. It reflects the complex interplay of legal, economic, and political forces that shape regulatory policies in the financial sector.

The outcome of this legal challenge could influence future regulatory actions and the overall landscape of consumer financial protections. As the situation evolves, both consumers and businesses remain in a state of uncertainty about the implications of future credit card fee structures.

Written By:
Mae Slater

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