LOS ANGELES — A federal judge in Texas has temporarily halted the Biden administration’s plan to drop late fees for credit cards to $8, which would take effect next week.
The nationwide temporary injunction imposed by Judge Mark Pittman in the Northern District of Texas is a victory for big banks and major credit card companies, which collect billions in late fee revenue each year, and block the proposal from taking effect. It was also a victory for the American Chamber of Commerce, which sued on behalf of the banks.
New regulations proposed by the Consumer Financial Protection Bureau would have set an $8 ceiling on most credit card late fees, or required banks to show why they should charge more than $8 for such a fee.
The rule would reduce the average credit card late fee from $32. The bureau estimates that banks incur about $14 billion in credit card late fees a year.
In a statement Friday night, White House spokesman Jeremy Edwards said, “We are disappointed that the court has sided with House Republicans, big banks and special interests to suspend an important measure to save American families billions in garbage bills.”
The banks sued earlier this year to stop the lawsuit, but hit a roadblock when Pittman ordered the case moved to Washington, D.C., because some of the banks operate in North Texas. However, the appeals court reversed most of Pittman’s decision and ordered him to rule on the bank’s request for an injunction.
When Pittman imposed the injunction, he used a significant portion of his order to chastise the Fifth Circuit Court of Appeals for sending the case back to him after it had already ruled that he should handle the case outside of Washington. Critics of the case called the case the latest example of judicial “forum shopping,” where a company files a lawsuit in a friendly district in order to have a greater chance of obtaining a favorable ruling.
As part of his re-election campaign, President Joe Biden has sought to highlight his administration’s push to curb what he calls “junk fees,” bank-related fees such as late fees, ATM fees and overdraft fees.
“Every month the credit card late fee rule is blocked costs Americans $800 million,” the White House said Friday.
Banks see the campaign as a political battle against their business model, while consumer advocates see the fees as a basis for the level of risk banks and credit card companies are taking.
“In a series of lawsuits designed to record corporate profits at everyone’s expense, the US Chamber has gotten its way for now — ensuring families are priced out for a while with credit card late fees of up to $41,” Liz Zelnick told Accountable.US.