LOS ANGELES — A federal judge in Texas has temporarily halted the Biden administration’s plan to lower credit card late fees to $8, which was set to take effect next week.
The temporary nationwide injunction imposed by Northern District of Texas Judge Mark Pittman is a victory for big banks and major credit card companies, which collect billions of dollars in late fees each year and want to Prevent this proposal from taking effect. It was also a victory for the U.S. Chamber of Commerce, which sued on behalf of the banks.
New rules proposed by the Consumer Financial Protection Bureau would either cap late payment fees on most credit cards at $8 or require banks to explain why such fees should be charged more than $8.
The rule will reduce the average late fee on credit cards from $32. The bureau estimates that banks charge about $14 billion in credit card late fees each year.
“We are saddened by the court’s support for House Republicans, big banks and special interests in halting a critical measure aimed at saving American families billions in garbage bills,” White House spokesman Jeremy Edwards said in a statement Friday night. disappointment.
The bank had filed suit earlier this year to stop the proceedings, but hit a roadblock when Pittman ordered the case moved to Washington, D.C., because few banks do business in North Texas. However, an appeals court overturned much of Pittman’s decision and ordered him to rule on the bank’s request for an injunction.
While Pittman did issue an injunction, he spent a large portion of his order chastising the 5th Circuit Court of Appeals for sending it back to him after he had already ruled that the case should be handled outside of Washington. Critics of the lawsuit call the case the latest example of judicial “venue shopping,” in which a company files a lawsuit in a friendly area to have a better chance of obtaining a favorable ruling.
As part of his reelection campaign, President Joe Biden has sought to highlight his administration’s efforts to crack down on what he calls “junk fees,” which are charges associated with banks such as late fees, ATM fees and overdraft fees.
The White House said Friday that “blocking credit card late fee rules costs Americans more than $800 million every month.”
Banks see the movement as a political battle against their business models, while consumer advocates argue the bank fees are too high based on the level of risk banks and credit card companies take on.
“The U.S. Chamber of Commerce recently launched a series of lawsuits aimed at boosting record corporate profits at the expense of everyone else, but now it’s getting its way — ensuring families are price gouged for as long as $41 in late credit card fees. Longer,” said Liz Zelnick of Accountable.US.
