Federal judge overturns rule limiting credit card late fees to .
A recent decision by a federal judge has dismantled a rule intended to cap credit card late fees at nationwide. This action comes after the Trump administration chose not to defend the regulation, which was initiated under President Biden’s administration in March 2024. The proposed measure aimed to alleviate financial burdens on American families, with projections estimating a savings of approximately billion annually.
Immediately following its announcement, financial institutions challenged the rule in court. The Consumer Financial Protection Bureau (CFPB) and banking representatives had mutually agreed to withdraw their legal battle, leading to the dismissal of the case by North Texas U.S. District Judge Mark Pittman. This resolution marks yet another shift in regulatory policies as the CFPB has attempted to reverse several directives established during Biden’s presidency.
Throughout the past year, the CFPB has undertaken efforts to retract numerous Biden-era initiatives, including potential enforcement actions against large financial entities such as Capital One and Rocket Homes. Notably, Trump has made efforts to undermine the CFPB, which was originally created as a protective measure for consumers following the 2008 financial crisis.
Judge Pittman had previously indicated skepticism regarding the durability of the fee cap against legal scrutiny from banking institutions. In December, he noted that the regulation could potentially violate a 2009 law which permits businesses to impose adequate penalty fees. This sentiment was echoed by industry advocates, who argued that the cap would adversely affect responsible consumers who pay their credit card bills on time by undermining key financial incentives.
The CFPB has reported that the average late fee for credit cards currently stands at , amounting to approximately billion paid by consumers to banks each year. In light of these developments, Rohit Chopra, director of the CFPB during the Biden administration, has expressed concerns about the financial industry’s practices, accusing banks of profiting from excessive fees that burden American consumers.
This recent ruling highlights the ongoing tension between regulatory bodies and financial institutions, as well as the complexities involved in consumer protection legislation in the United States. Moving forward, the implications of this ruling may have lasting effects on the landscape of credit card fees and consumer financial protections.
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