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Federal Judge Strikes Down Biden Administration’s Credit Card Late Fee Cap

Court Blocks Biden's Rule Limiting Credit Card Late Fees to $8

In a significant blow to consumer protection, a federal judge in Texas has blocked a new rule aimed at curbing excessive credit card late fees. The rule, set to take effect on Tuesday, would have saved consumers an estimated $10 billion annually by capping late fees at $8.

However, US District Judge Mark T. Pittman, a Trump appointee, granted a preliminary injunction to several business and banking organizations, including the US Chamber of Commerce, which sued the Consumer Financial Protection Bureau (CFPB) over the rule.

The CFPB finalized the rule in March, citing a 2010 loophole that allowed credit card companies to hike late fees on borrowers. The rule would have applied to large credit card issuers, representing over 95% of outstanding credit card debt.

Judge Halts Biden Administration’s Effort to Cap Credit Card Late Fees

Consumer advocates hailed the rule as a crucial step towards easing financial burdens for Americans, particularly those struggling with credit card debt due to high inflation.

The injunction means the rule cannot take effect until a hearing is held to adjudicate the case further. The CFPB expressed disappointment, stating that the delay would cost consumers $800 million in late fees each month. The US Chamber of Commerce, on the other hand, celebrated the ruling as a “major win” for responsible consumers and businesses.

Consumer Reports, a non-profit advocacy group, criticized the ruling, saying it would allow credit card companies to continue “bilking” consumers out of billions of dollars in excessive late fees. The Biden administration has been pushing to eliminate “junk fees” and ease financial burdens for Americans, and this rule was a key part of that effort.

The delay is a setback for consumers, but the CFPB remains committed to defending the rule and protecting consumers from predatory practices.

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