Set to take effect on Tuesday, the rule would save households $10 billion a year in “junk fees,” the Consumer Financial Protection Bureau said.
In March, the Consumer Financial Protection Bureau announced that a new federal rule would cap fees on late credit card payments at $8 a month, estimating that the change would save American households $10 billion a year.
On Friday, a federal judge in Fort Worth temporarily blocked the rule, siding with bank and credit card company lobbyists who contend in a lawsuit that it is unconstitutional.
The rule was scheduled to take effect on Tuesday. Now, the lobbyists can continue their legal fight in U.S. District Court before Judge Mark T. Pittman, who granted the preliminary injunction.
The consumer bureau’s new rule would limit issuers to an $8 fee unless they could show that more money was needed to cover their collection costs. The bureau estimated that the rule would apply to more than 95 percent of all outstanding credit card balances.
The Federal Reserve previously aimed to significantly limit credit card late fees in 2010. But a loophole in its rule, which permitted 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.
In announcing the new rule, Rohit Chopra, the bureau’s director, said it would end “the era of big credit card companies hiding behind the excuse of inflation when they hike fees on borrowers and boost their own bottom lines.” President Biden backed the rule, saying, “The American people are tired of being played for suckers.”
Two days later, the U.S. Chamber of Commerce joined the American Bankers Association and the Consumer Bankers Association — whose boards of directors include executives from Bank of America, Capital One, Citibank and JPMorgan Chase — in suing Mr. Chopra and his bureau. Three Texas business associations are also plaintiffs.
Source: Elections - nytimes.com
