CFPB rule to save Americans $10 billion a year in late fees faces possible last-minute freeze

A recently proposed regulation aimed at reducing late fees on credit cards faces a legal challenge led by the U.S. Chamber of Commerce.

The regulation, spearheaded by the Consumer Financial Protection Bureau (CFPB), was scheduled to take effect on Tuesday, June 2023, but a federal judge in the Northern District of Texas is expected to rule by Friday on whether to grant a preliminary injunction to block its implementation.

The CFPB, headed by Rohit Chopra, argues that the rule would save American families billions of dollars annually by lowering late fees to a maximum of $8 per incident.

Currently, most banks charge around $32 per late payment, a substantial burden for individuals with low credit scores who often accumulate significant fees.

However, the credit card industry and related trade associations, including the American Bankers Association and the Consumer Bankers Association, contend that the regulation will unfairly redistribute costs to customers who pay their bills on time.

They argue that it could limit access to credit or lead to other fee increases to offset the revenue loss.

The industry’s lawsuit against the CFPB was filed in Texas, which is known for being a more favorable jurisdiction for corporate interests.

If the preliminary injunction is granted, it could delay the implementation of the regulation indefinitely until the legal dispute is resolved.

Analysts predict that the Chamber of Commerce has a strong chance of successfully blocking the rule, likely through either the Northern District of Texas or the 5th Circuit Court of Appeals.

If this occurs, it would mark a significant setback for the CFPB’s efforts to protect consumers from high late fees.