The rule would bring the average credit card late fee down from $32. The bureau estimates banks bring in roughly $14 billion in credit card late fees a year.
Joe Biden. Pic/AFP
A federal judge in Texas temporarily halted a plan by the Biden administration to lower late fees on credit cards to $8 that was slated to go into effect next week.
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The temporary nationwide injunction imposed by Judge Mark Pittman in the Northern District of Texas is a win for the big banks and major credit card companies, which collect billions in revenue each year in late fees and were looking to stop the proposal from going into effect. It is also a win for the U.S. Chamber of Commerce, which led the lawsuit on behalf of the banks.
The new regulations that were proposed by Consumer Financial Protection Bureau would have set a ceiling of $8 for most credit card late fees or require banks to show why they should charge more than $8 for such a fee. The rule would bring the average credit card late fee down from $32. The bureau estimates banks bring in roughly $14 billion in credit card late fees a year.
Banks had sued to stop the lawsuit earlier this year, but they had run into a roadblock when Pittman ordered the case moved to Washington, D.C., because of the fact that few banks operate in northern Texas. However, an appeals court reversed most of Pittman's decision and ordered him to rule on the bank's request for an injunction.
As part of his reelection campaign, President Joe Biden has tried to highlight his administration's push to clamp down on what he calls ¿junk fees,¿ which are bank-related fees like late fees, ATM fees and overdraft fees. Banks have seen the campaign as a political battle against their business model, while consumer advocates have seen these bank fees as excessive based on the amount of risk that banks and credit card companies are taking on.
¿In their latest in a stack of lawsuits designed to pad record corporate profits at the expense of everyone else, the U.S. Chamber got its way for now -- ensuring families get price-gouged a little longer with credit card late fees as high as $41," said Liz Zelnick with Accountable.US.
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