Federal judge temporarily halts Biden plan to lower credit card late fees to $8
LOS ANGELES — A federal judge in Texas has temporarily halted a Biden administration plan to reduce late fees on credit cards to $8, which was set to take effect next week.
The temporary nationwide ban imposed by Judge Mark Pittman in the Northern District of Texas is a victory for the big banks and major credit card companies, which collect billions in revenue each year in late payments and who sought to prevent the proposal from taking effect. It’s also a victory for the U.S. Chamber of Commerce, which led the lawsuit on behalf of the banks.
The new regulations proposed by the Consumer Financial Protection Bureau would have set an $8 cap on most credit card late fees or required banks to demonstrate why they should charge more than $8 for such a fee to take.
The rule would reduce the average late credit card penalty from $32. The agency estimates that banks take in about $14 billion in credit card payments annually.
White House spokesman Jeremy Edwards said in a statement Friday evening: “We are disappointed that a court has sided with House Republicans, big banks and special interests to pause a critical measure to provide American families with billions in to save junk costs.”
Banks had sued earlier this year to stop the lawsuit, but they hit a roadblock when Pittman ordered the case moved to Washington, D.C., due to the fact that few banks operate in North Texas. However, an appeals court largely reversed Pittman’s decision and ordered him to rule on the bank’s request for an injunction.
Although Pittman imposed the injunction, he used a significant portion of his injunction to chastise the Fifth Circuit Court of Appeals for sending this case back to him after already ruling that the case should be heard from Washington. Critics of the lawsuit call the case the latest example of judicial “forum shopping,” in which a company files a lawsuit in a friendly district to have a better chance of a favorable ruling.
As part of his re-election campaign, President Joe Biden has sought to emphasize his administration’s push to curb what he calls “junk fees,” which are bank-related fees such as late fees, ATM charges and overdraft fees.
“Each month that the credit card late fee rule is blocked will cost Americans more than $800 million,” the White House said Friday.
Banks have seen the campaign as a political battle against their business model, while consumer advocates see these banking fees as excessive based on the amount of risk banks and credit card companies face.
“In their latest in a series of lawsuits designed to boost record corporate profits at everyone else’s expense, the U.S. House has gotten its way for now — ensuring that families will be squeezed for a little longer with credit card delinquencies that could amount to as much as $41,” says Liz Zelnick of Accountable.US.