Chamber, business groups sue CFPB over credit card late fee cap
Business groups sued the Consumer Financial Protection Bureau (CFPB) over a new rule that caps credit card late fees levied by large issuers.
The consumer watchdog finalized the rule Tuesday to limit late fees to $8, which is 75 percent less than the average late fee of $32. The CFPB estimates the rule will save Americans more than $10 billion in late fees each year, or an average of $200 per person.
But its opponents allege the rule exceeds the agency’s authority and would result in more late payments, higher debt, lower credit scores and reduced access to credit.
The U.S. Chamber of Commerce, Fort Worth Chamber of Commerce, Longview Chamber of Commerce, Consumer Bankers Association (CBA), American Bankers Association (ABA) and Texas Association of Business filed the lawsuit against the CFPB in the U.S. District Court for the Northern District of Texas.
“By significantly limiting late fees, the CFPB is not only discouraging responsible credit card use but also imposing higher costs on consumers and limiting choices in credit card options and benefits,” said Neil Bradley, executive vice president, chief policy officer and head of strategic advocacy at the Chamber.
“The CFPB is acting outside its authority and the Chamber’s lawsuit seeks to protect American cardholders who pay their bills on time and enjoy the numerous benefits of diverse credit card offerings from America’s financial institutions.”
The new rule came as part of the Biden administration’s efforts to crack down on “junk fees.” President Biden also announced a “strike force” to crack down on price-gouging on Tuesday, just days before he was slated to make his economic pitch to voters during the State of the Union on Thursday.
“We have seen the junk fee era really creep across so many sectors of the economy and across government. We’re just trying to make sure that consumers and small businesses and workers are getting a fair shake wherever they go,” CFPB Director Rohit Chopra told reporters ahead of the announcement.
Consumer watchdogs applauded the move. Liz Zelnick, director of the economic security and corporate power program at Accountable.US, slammed the business groups who filed the “greed-motivated” lawsuit.
“The U.S. Chamber is again doing the dirty work of its big bank members that are notorious for price-gouging Americans with credit card late fees as high as $41,” said Zelnick. “On top of that, they intentionally chose a conservative-leaning, industry-friendly court in the hopes of derailing any kind of regulation that would cut into their bottom line.”
But business groups blasted the credit card late fee cap as political and asked the courts to block the implementation of the rule.
“Once again, we have reluctantly been forced to sue a federal regulator because the CFPB has ignored industry and other stakeholder comments demonstrating that this rule exceeds the bureau’s statutory authority and will hurt rather than help consumers,” said ABA President and CEO Rob Nichols. “This rule is about politics not policy, and we look forward to the court’s review.”
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