Judge Grants CFPB 30 Days to Settle Lawsuit Over Credit Card Late Fee Rule
A federal judge has granted the CFPB 30 days to try to settle the lawsuit challenging the bureau’s credit card late fee rule that was issued during the Biden Administration.
“The Bureau’s new leadership is currently reviewing and considering its positions on various agency actions, including the regulation at issue in this case,” the CFPB’s attorneys said, in filing the request with Judge Mark T. Pittman of the U.S. District Court for the Northern District of Texas.
The rule currently is under a preliminary injunction issued by Pittman blocking implementation of the rule.
CFPB attorneys said that the two sides in the case, which includes the U.S. Chamber of Commerce, are discussing ways to settle the case.
“Based on those conversations, the Bureau is optimistic that an agreement can be reached within 30 days, but the parties require additional time to see if an agreed resolution is feasible,” CFPB attorneys wrote. The bureau asked for a stay in all pending deadlines in the case and asked that the judge requires that a status report be filed within 30 days.
The Trump Administration’s CFPB has been contemplating ways to roll back rules and policies that were implemented during the tenure of former Director Rohit Chopra, who favored a strict regulatory regime.
On March 5, 2024, the CFPB released the final credit card late fee rule. It reduced the late fee safe harbor amount for larger issuers to a proposed $8 amount and eliminated automatic annual inflation adjustments for issuers subject to the reduced safe harbor amount.
The reduced safe harbor late fee amount only applies to credit card issuers that have 1 million or more open accounts (“larger issuers”), who, according to the CFPB, constitute the issuers with 95% of total outstanding credit card balances. The final rule also adjusts the higher, pre-existing safe harbor late fee amounts that issuers below the 1 million account threshold (“smaller issuers”) can charge for a first violation from $30 to $32 and for subsequent violations during the next six billing cycles from $41 to $43.
Two days after the rule was issued, the Chamber of Commerce of the United States of America, Fort Worth Chamber of Commerce, Longview Chamber of Commerce, American Bankers Association, Consumer Bankers Association, and Texas Association of Business filed suit challenging the rule. They argued that in issuing the rule, the CFPB had ignored the fact that card issuers could charge a penalty fee.
The CFPB under Biden had asked that the case be transferred to the U.S. District Court for the District of Columbia. Pittman initially agreed, but the Fifth Circuit Court of Appeals refused to let him do so.
Subsequently, Judge Pittman issued the preliminary injunction blocking enforcement of the rule.
‘The CARD Act explicitly allows card issuers to impose ‘penalty fee[s],’” Pittman wrote in December, when he refused to lift the preliminary injunction blocking the rule.
He continued, “The point is that, under the CARD Act, card issuers have the opportunity to charge penalty fees reasonable and proportional to violations, and narrowing the safe harbor to cost-based fees eliminates that opportunity.”