The American Bankers Association today joined the U.S. Chamber of Commerce and four business groups in filing a lawsuit in federal court challenging the Consumer Financial Protection Bureau’s new rule limiting credit card late fees. The plaintiffs are also seeking a preliminary injunction barring the bureau from implementing the new rule.
Earlier this week, the CFPB issued a final rule to lower the safe harbor dollar amount for late fees to $8, eliminate a higher safe harbor dollar amount for late fees for subsequent violations of the same type, and eliminate the annual inflation adjustment for the safe harbor amount that was provided by the Federal Reserve in 2010. In a lawsuit filed in U.S. District Court for the Northern District of Texas, ABA and the other plaintiffs said the rule not only slashes by 75% the safe harbor amount initially set by the Fed, it also upends more than a decade of regulation. The bureau exceeded its statutory authority, and offered deficient analysis and reasoning, to achieve a pre-ordained outcome that will ultimately harm the consumers it is charged with protecting, the groups said.
“The CFPB’s action to cap credit card late fees below banks’ actual costs exceeds its authority and would result in more late payments, increased debt, reduced credit access and higher APRs for all consumers—including the vast majority of cardholders who pay on time each month,” ABA President and CEO Rob Nichols said. “Once again, we have reluctantly been forced to sue a federal regulator because the CFPB has ignored industry and other stakeholder comments demonstrating that this rule exceeds the bureau’s statutory authority and will hurt rather than help consumers. This rule is about politics not policy, and we look forward to the court’s review.”
