Possible Last-Minute Freeze Threatens CFPB Rule That Could Save Americans $10 Billion Annually in Late Fees

A recent Consumer Financial Protection Bureau regulation aimed at saving Americans billions in late credit card fees is facing opposition led by the U.S. Chamber of Commerce. The card industry recently sued the CFPB in federal court to prevent the implementation of this new rule, which would limit late fees to $8 per incident. A judge in the Northern District of Texas is expected to announce whether the court will grant a freeze on the regulation just days before it was set to be enforced. This regulation is part of President Joe Biden’s efforts to combat what he considers to be junk fees.

The credit card industry has been steadily increasing late fees since 2010, with users with low credit scores paying an average of $138 in fees annually per card, according to CFPB Director Rohit Chopra. However, the industry argues that the new regulation would redistribute costs to those who pay their bills on time and could potentially harm those it aims to benefit by increasing the likelihood of users falling behind on payments. The rule is estimated to save American families $10 billion per year in fees.

In light of the potential revenue hit from the new regulation, card issuers such as Capital One and Synchrony have discussed strategies to offset these losses. This could include raising interest rates, introducing new fees such as paper statement fees, or adjusting their lending practices. Capital One CEO Richard Fairbank mentioned that the CFPB rule could impact the bank’s revenue for a few years as they implement measures to generate revenue elsewhere.

There is speculation that the Chamber of Commerce may succeed in delaying the implementation of the regulation either through the Northern District of Texas or the 5th Circuit Court of Appeals. A preliminary injunction could be granted, halting the rule until a resolution is reached, possibly through a lengthy trial process. The industry group, which includes trade associations such as the American Bankers Association and the Consumer Bankers Association, chose to file the lawsuit in Texas due to its corporate-friendly reputation. It is expected that the implementation of the rule will be blocked before its scheduled enforcement date.

The CFPB has refrained from commenting on the matter, and the Chamber of Commerce has yet to respond to requests for comment. This ongoing legal battle highlights the tension between consumer protection measures and industry interests, as well as the potential impacts on cardholders and financial institutions. In the meantime, consumers should stay informed about developments in this case and be prepared for potential changes in late fee policies from credit card issuers.