Judge Scraps CFPB’s Rule to Cap Credit Card Late Fees

A federal judge has agreed to scrap a final rule issued by the Consumer Financial Protection Bureau (CFPB) that capped credit card late fees at $8.

US District Judge Mark Pittman approved a joint request by the CFPB and a coalition of six business and banking groups, including the US Chamber of Commerce and American Bankers Association (ABA), to withdraw the rule.

The CFPB introduced the final rule in March 2024, which reduced the typical credit card late fee from $32 to $8. The change came after the regulator found that many banks had raised their late fees annually without justification for increased costs and formed part of the CFPB’s broader crackdown on “junk fees.”

However, the agency has since aligned with opponents and acknowledged that the rule, which was implemented during President Joe Biden’s administration, was unlawful.

In particular, Pittmann ruled that the CFPB’s overstepped its authority under the Credit Card Accountability Responsibility and Disclosure Act.

He also determined that the late fee rule violated the Administrative Procedure Act because it prevented card issuers from charging fees that are “reasonable and proportional to violations.”

In a joint statement, ABA and the other plaintiffs called the verdict “a win for consumers and common sense.”

They said: “If the CFPB’s rule had gone into effect, it would have resulted in more late payments, lower credit scores, higher interest rates and reduced credit access for those who need it most.”

“It would have also penalized the millions of Americans who pay their credit card bills on time and reduced important incentives for consumers to manage their finances. We look forward to the court’s consideration of our joint request to vacate the rule.”