A federal judge in Fort Worth, Texas, has issued a preliminary injunction blocking a new rule by the Biden administration that aimed to cap credit card late fees at $8. The rule, set to go into effect this week, was halted following a lawsuit filed by business and banking organizations, including the US Chamber of Commerce.
The rule, finalized by the Consumer Financial Protection Bureau in March, was estimated to save consumers around $10 billion annually by reducing late fees from an average of $32. However, the court's decision to grant a preliminary injunction means that the rule cannot be implemented until a detailed hearing is conducted.
The lawsuit, led by the US Chamber of Commerce, argued that the new rule violated several federal statutes. Critics of the rule claim that credit card companies would lose significant profits if the cap on late fees were enforced.
The Biden administration's initiative to eliminate 'junk fees' and protect consumers from excessive charges is part of a broader effort to ease financial burdens for Americans. The rule specifically targeted large credit card issuers with more than 1 million accounts, which represent the majority of outstanding credit card debt in the country.
The Consumer Financial Protection Bureau highlighted that the rule aimed to close a loophole that allowed credit card companies to increase late fees on payments. A national survey revealed that one in five American adults had paid a credit card late fee in the past year, indicating widespread support for lowering the maximum late fee.
While the court's decision to block the rule has disappointed consumer advocacy groups, the legal battle over credit card late fees is likely to continue as the Biden administration seeks to address financial challenges faced by many Americans.
