A Texas federal judge has ruled against a U.S. Consumer Financial Protection Bureau (CFPB) regulation that sought to cap credit card late fees at $8, marking a significant setback for efforts to limit financial penalties. Judge Mark Pittman, appointed by former President Donald Trump, sided with both the CFPB and a coalition of business and banking groups, including the U.S. Chamber of Commerce and the American Bankers Association, in declaring the rule invalid.
The regulation, originally introduced during President Joe Biden’s administration, was designed to reduce the burden on consumers by slashing the average late fee from approximately $32. However, the rule faced strong opposition from industry leaders, who argued that it violated the Credit Card Accountability and Disclosure Act of 2009. The rule had limited late fees for credit card issuers with more than one million active accounts unless they could demonstrate that higher fees were necessary to cover their operational costs.
Critics of the rule, including a group of major financial organizations, argued that the CFPB had overstepped its authority, contending that Congress intended fees to remain high enough to deter late payments and compensate issuers. Furthermore, they claimed that the rule unfairly shifted the financial burden onto responsible consumers who consistently pay their bills on time.
In agreeing to cancel the rule, Judge Pittman reaffirmed that the regulation violated legal provisions regarding reasonable and proportional fees for credit card issuers. This ruling also aligns with the Trump administration’s ongoing efforts to roll back regulations seen as unfavorable to businesses. In a related development, a federal appeals court in Washington recently gave the green light for the Trump administration to reduce the size of the CFPB, while still allowing it to perform its essential functions.
Both the banking and business coalitions hailed the judge’s decision as a victory for consumers and sound financial policy.
