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 scheduled to take effect next week.
The temporary injunction imposed nationwide 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 of dollars in revenue each year in late fees and sought prevent the proposal from coming into force. It’s also a victory for the US Chamber of Commerce, which led the process on behalf of the banks.
New regulations proposed by the Consumer Financial Protection Bureau would have capped most credit card late fees at $8 or required banks to demonstrate why they should charge more than $8 for such a fee.
The rule would reduce the average credit card late fee by $32. The agency estimates that banks collect about $14 billion in credit card late fees per year.
The banks sued to stop the lawsuit earlier this year, but hit a snag 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 reversed most of Pittman’s decision and ordered him to rule on the bank’s injunction request.
Although Pittman imposed the injunction, he used a significant portion of his order to punish the Fifth Circuit Court of Appeals for sending this case back to him after it had already ruled that the case should be handled outside of Washington. Critics of the lawsuit called the case the latest example of judicial “forum shopping,” in which a company files a lawsuit in a friendly district to have a greater chance of obtaining a favorable ruling.
As part of his re-election campaign, President Joe Biden has tried to highlight his administration’s effort to crack down on what he calls “junk fees,” which are bank-related fees like late fees, ATM fees and fees. special check.
Banks viewed the campaign as a political battle against their business model, while consumer advocates called these bank fees excessive based on the amount of risk banks and credit card companies are taking on.
“In its latest in a series of lawsuits aimed at increasing corporate profits at the expense of everyone else, the U.S. Chamber has gotten what it wanted for now – ensuring that families suffer a little more price gouging with interest rates. credit card arrears of up to $41,” said Liz Zelnick of Accountable.US.
