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A federal judge issued a temporary injunction of the Consumer Financial Protection Bureau’s final rule on credit card late fees, which was scheduled to take effect tomorrow.
Court Ruling: U.S. District Judge Mark Pittman of the Northern District of Texas issued the injunction pending a U.S. Supreme Court decision on the constitutionality of the CFPB’s funding structure.
Supreme Court Case: The high court is due to rule by the end of June on a Fifth Circuit decision that the CFPB’s funding structure violates the Constitution’s appropriations clause and separation of powers. That case has also led to an ICBA-advocated nationwide injunction of the bureau’s 1071 final rule on small-business data collection and reporting.
Rule Details: The CFPB rule:
Cuts the credit card late fee safe harbor under the CARD Act from the current levels of $30 for the first violation and $41 for subsequent violations to $8, without inflation adjustments.
Applies to issuers with 1 million or more open accounts, which allows the CFPB to avoid analyzing the rule under the Small Business Regulatory Enforcement Fairness Act.
Allows covered issuers to charge fees above the threshold as long as they can prove the higher fee is necessary to cover their collection costs.
ICBA View: In a national news release after the rule’s release, ICBA said the rule sends the wrong message that punctual credit card payments are not a significant priority, which will harm consumers by leading to more late payments and additional interest charges.