A federal judge in Texas, Mark Pittman, has temporarily stopped the Biden administration’s plan to limit credit card late fees to $8. This plan, which was supposed to start next week, aimed to lower the average late fee from $32 to $8.
The ruling is a victory for major banks and credit card companies, which collect billions of dollars in late fees annually, as well as the U.S. Chamber of Commerce, which led the lawsuit against the proposal.
The Consumer Financial Protection Bureau had proposed the new regulation to limit excessive late fees, seen as “junk fees” by consumer advocates.
Federal judge issues injunction against limits on credit card late fees
The bureau estimates that banks generate around $14 billion in credit card late fees each year. The White House has expressed disappointment with the ruling, stating that it will cost Americans over $800 million every month the rule is blocked.
Critics of the lawsuit have accused the banks of “forum shopping” by filing the case in a friendly district to increase their chances of a favorable ruling. The case has been seen as a political battle between the Biden administration’s efforts to crack down on excessive bank fees and the banks’ desire to maintain their business model.
Consumer advocates have hailed the proposed regulation to protect consumers from unfair practices, while banks have argued that the fees are necessary to cover their costs.
