Judge Turns Away New Bid to Cap Credit Card Late Fees at $8

By Zachary Stieber

A federal judge has rejected the Consumer Financial Protection Bureau’s request to allow its rule capping credit card late fees to take effect.

U.S. District Judge Mark Pittman said in a Dec. 6 order that he was keeping his injunction in place.

The bureau announced in early 2024 a new rule that would cap late fees for credit cards at $8. The U.S. Chamber of Commerce sued, seeking to stop the rule from taking effect.

Pittman in May blocked the rule because of the way the Consumer Financial Protection Bureau (CFPB) is structured. The judge said at the time that because the independent regulatory agency is, according to an appeals court, unconstitutionally funded, any regulations it promulgates are likely unconstitutional as well.

The CFPB said a U.S. Supreme Court decision that later overturned the appeals court ruling meant the judge should dissolve his injunction.

Pittman disagreed, saying in the new decision that the rule violates a federal law called the Credit Card Accountability and Disclosure Act. The 2009 law lets credit card companies impose a “penalty fee” when customers violate their agreements with them. It also empowers the CFPB to establish caps that are presumed reasonable. The current caps are $30 for an initial violation and $41 for subsequent violations.

The $8 cap would be so low that companies would only be able to recover collection costs, the CFPB has said. According to Pittman, that is different from the penalty fee authorized by Congress.

He wrote that the law does two things: “(1) enables card issuers to impose penalty fees; and (2) tasks the CFPB with establishing standards for those fees. Congress assigned the CFPB as an umpire to call balls and strikes on the reasonableness and proportionality of penalty fees.

“However, by issuing the Final Rule—which prevents card issuers from actually imposing penalty fees—the CFPB has impermissibly assumed the role of commissioner and established a strike-zone only large enough for pitches right down the middle.”

Pittman also turned down the CFPB’s bid to transfer the case from Texas to Washington, finding that the local Fort Worth Chamber of Commerce, one of the plaintiffs, has standing to challenge the rule.

The chamber did not respond to a request for comment by publication time.

A CFPB spokesperson said the judge’s ruling “allows big banks to extract $27 million in excessive late fees from American families every single day.”

The agency estimates that without the rule, people will spend more than $56 billion on credit card fees over the next five years.

Reuters contributed to this report.