The Consumer Financial Protection Bureau today reached an agreement with the American Bankers Association and other plaintiffs to settle a lawsuit over its rule on credit card late fees.
The CFPB last year 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. ABA joined the U.S. Chamber of Commerce and other plaintiffs in challenging the rule in U.S. District Court for Northern Texas, arguing the bureau exceeded its statutory authority.
Under the terms of the settlement, the bureau acknowledged it exceeded its authority under the Credit Card Accountability Responsibility and Disclosure Act, and that the late fee rule violates the Administrative Procedure Act. The parties asked the court to vacate the final rule. The judge must approve the agreement.
In a joint statement, ABA and the other plaintiffs called the agreement a win for consumers and common sense.
“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,” they said. “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.”
