A government-imposed $8 limit on most credit card late fees is the latest consumer protection regulation to be scrapped by President Trump’s administration.
The Consumer Financial Protection Bureau adopted the fee cap last year, estimating that it would save households $10 billion a year. A coalition of banking and business trade groups immediately sued to block the rule, arguing that the bureau had exceeded its statutory authority, and won an injunction that prevented it from taking effect.
On Tuesday, a federal judge in Texas vacated the fee limit at the joint request of the banks and the consumer bureau. Now under the leadership of Russell T. Vought, the White House budget office leader who is also serving as the bureau’s acting director, the consumer bureau reversed its stance and said in court filings that it agreed with the banks that the fee limit illegally stretched beyond the agency’s bounds.
Banks and lenders, whose late fees typically average around $32, celebrated their victory.
“This is a win for consumers and common sense,” the lawsuit’s plaintiffs said in a joint statement. The group included the American Bankers Association, the Consumer Bankers Association and the United States Chamber of Commerce, along with three Texas business associations.
“If the C.F.P.B.’s rule had gone into effect, it would have resulted in more late payments, lower credit scores, higher interest rates and reduced credit access for those who need it most,” the group added. “It would have also penalized the millions of Americans who pay their credit card bills on time and reduced important incentives for consumers to manage their finances.”
Consumer advocates took the opposite stance. “This decision will allow big banks to exploit consumers to the tune of $10 billion annually by charging inflated late fees that far exceed what late payments cost them to collect,” said Chi Chi Wu, a senior lawyer with the National Consumer Law Center.
The case had an unusually convoluted journey through federal court in the Northern District of Texas, the typically pro-business venue in which the trade groups chose to bring their case. Judge Mark Pittman, one of only two active judges in the court’s Fort Worth division, tried twice to transfer the case to Washington, and was overturned both times by the U.S. Court of Appeals for the Fifth Circuit.
In a ruling allowing the case to proceed in his court, Judge Pittman described the plaintiffs’ ties to Fort Worth as “weak at best,” but he acceded to the appeals court’s determination to keep the issue within the Fifth Circuit.
Under Mr. Trump, the consumer bureau has been rapidly undoing rules and enforcement actions initiated during the administration of former President Joseph R. Biden Jr.
Mr. Trump is expected to soon sign congressional resolutions striking down two actions finalized at the tail end of Mr. Biden’s term: a $5 limit on most bank overdraft fees and a rule giving the consumer bureau greater oversight powers over payment apps run by large technology companies.
Mr. Vought, who has frozen most of the consumer bureau’s work but been barred by federal courts from completely dismantling the agency, has also abandoned more than a dozen enforcement actions against banks and lenders. They include lawsuits against Capital One that accused it of deceptively steering customers into low-interest savings accounts and against three large banks over inadequate fraud safeguards on their Zelle payments system.
Stacy Cowley is a business reporter who writes about a broad array of topics related to consumer finance, including student debt, the banking industry and small business.
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