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The new rules, blocked by a federal judge, are aimed at closing a loophole that the Consumer Financial Protection Bureau said in 2010 was “exploited” by credit card companies to increase late payment fees.
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CNN
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A federal judge in Fort Worth, Texas, on Friday blocked a new Biden administration rule that would prohibit credit card companies from charging customers more than $8 in late fees.
U.S. District Judge Mark T. Pittman, an appointee of former President Donald Trump, has granted preliminary injunctions against several companies and banking organizations, arguing that the new rules violate several federal statutes. I put it down.
Those groups, led by the right-wing U.S. Chamber of Commerce, sued the Consumer Financial Protection Bureau after the rule was finalized in March. The rule, scheduled to go into effect Tuesday, will save consumers about $10 billion a year by lowering fees from an average of $32, the CFPB estimates.
A preliminary injunction means the rules cannot go into effect until a hearing is held where the case can be determined in more detail.
“The credit card lobby’s lawsuit seeks to derail a rule that saves families $10 billion each year to keep tens of billions of dollars in profits by charging borrowers late fees that far exceed their actual cost.” “This is an attempt to do so,” a CFPB spokesperson said. CNN reported in a statement. “Delaying this rule would cost consumers $800 million a month in late fees, an amount that would inflate the profits of the largest credit card issuers. We will continue to abide by this rule so that we can stop paying excessive late fees, which we banned more than a year ago.”
The U.S. Chamber of Commerce has not responded to CNN’s request for comment.
“The court has approved a last-ditch effort by banks to prevent important limits on credit card late fees from taking effect next week,” said Chuck Bell, advocacy program director at the nonprofit Consumer Reports. It’s a shame,” he said. “For too long, credit card companies have racked up billions of dollars in excessive late fees from consumers.”
The rule, first proposed in February 2023, is part of the Biden administration’s broader push to eliminate “junk fees,” which are considered hidden or misleading charges to consumers.
of New rules apply to major credit card issuers — Users with over 1 million accounts. According to the CFPB, these companies account for more than 95% of total credit card debt.
The push to lower credit card fee targets is part of the Biden administration’s efforts to ease the financial burden for many Americans. Some borrowers, especially millennials and low-income families, I fell behind on my credit card debt After more than two years of high inflation.
The new rules also aim to close a loophole that the CFPB claims was “exploited” by credit card companies in 2010 to increase late payment fees.
According to a National Consumer Reports survey released in September, one in five American adults said they had paid a late charge on a credit card in the past 12 months. 82% of respondents supported lowering the cap on late fees.