NEWS: A federal trial court in Texas has issued a preliminary injunction to stop the Consumer Financial Protection Bureau’s (CFPB’s) credit card late fees rule from taking effect. The rule was set to become effective tomorrow, May 14.
In March, The League informed you that the CFPB had issued the rule, which capped credit card late fees at $8 per incident for card issuers with at least one million open accounts. The rule also ended automatic inflation adjustments on credit card late fees. The League had submitted a comment letter opposing the changes in 2023, warning the CFPB that “this kind of one-size-fits-all regulatory price-fixing is unfair to credit unions and will harm consumers across the United States.”
The federal judge in Texas sided with the financial institutions that filed the lawsuit against the rule, holding that the CFPB’s funding mechanism is unconstitutional and therefore invalidates the rulemaking.
In issuing the preliminary injunction, the judge found that the plaintiffs had established a likelihood of success on the merits because of a different decision – from the Fifth Circuit U.S. Court of Appeals, which held that the CFPB’s funding mechanism violates the U.S. Constitution. That case is now on appeal before the U.S. Supreme Court, which is expected to issue a decision by the end of June. The high court’s opinion could impact this lawsuit on the credit card late fees rule, as well as several other pending lawsuits.
According to one prominent national law firm: “Many observers believe that the Supreme Court will rule that the CFPB’s funding mechanism does not violate the Appropriations Clause and will reverse the Fifth Circuit’s decision. Should the Supreme Court reverse the Fifth Circuit … we expect the plaintiffs to ask the district court to address the merits of its alternative arguments for invalidating the rule. … Although it may be premature to declare the [credit card late fees] rule dead, it is clearly on life support” because the federal judge in Texas wrote that the plaintiffs’ other arguments against the late fees rule were “compelling.”
The League will alert you to further developments.
Federal court temporarily stays credit card late fees rule
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