A federal judge is blocking a White House plan to limit credit card late fees

A federal judge in Texas blocked a new government rule that would Reduce credit card late payments The charges are the focus of the Biden administration’s efforts to clamp down on “undesirable” fees.

Judge Mark Bittman of the U.S. District Court for the Northern District of Texas on Friday issued an injunction requested by the banking industry and other business interests to freeze the restrictions, which were scheduled to take effect May 14.

In his ruling, Pittman cited a 2022 decision from the U.S. Court of Appeals for the Fifth Circuit, which found that funding for the Consumer Financial Protection Bureau (CFPB), the federal agency charged with enforcing the credit card rule, was unconstitutional.

The regulations, adopted by the CFPB in March, seek to cap late fees for credit card payments at $8, compared to current late fees of $30 or more. Although they are an inconvenience for consumers, the fees generate about $9 billion annually for card issuers, according to the agency.

After the CFPB on March 5 Announce To the ban on what it called “excessive” credit card late fees, the American Bankers Association (ABA) and the U.S. Chamber of Commerce have filed a legal challenge.

The ABA, an industry trade group, praised Pittman’s decision.

“This injunction will spare banks from having to immediately comply with a rule that clearly exceeds the CFPB’s statutory authority and will lead to more late payments, lower credit scores, increased debt, reduced access to credit, and higher APRs for all consumers — including the vast majority.” “From cardholders who pay on time every month,” ABA CEO Rob Nicholls said in a statement.

Consumer groups criticized the decision, saying it would hurt credit card users across the United States

“In the latest in a flurry of lawsuits designed to drive record corporate profits at the expense of everyone else, the U.S. Chamber has gotten its way for now, ensuring families are exposed to price gouging for a little longer with credit card late fees of up to $41,” said Liz Zelnick. From Accountable.US, a nonpartisan advocacy group, in a statement, “The U.S. Chamber and the big banks it represents have corrupted our justice system by shopping in the least resistant courtrooms, and doing everything they can to avoid bringing their lawsuit before a fair and impartial federal judge.”

According to consumer advocates who support the CFPB’s late fee rule, credit card issuers hit customers with $14 billion in late payment fees in 2019, accounting for more than half of their fee revenue that year. Financial industry critics say such late fees target low- and middle-income consumers, particularly people of color.

Despite Pittman’s stay on Friday, analysts said the legal battle over late fees is likely to continue, with the case likely heading to the Supreme Court.

“We believe this opens the door for the CFPB to seek to lift the preliminary injunction if the Supreme Court rules in the coming weeks that Congress properly funded the agency,” Jarrett Seaberg of T.D. Cowen Washington Research Group said in a report following the decision. “That is why we believe this is not the end of the fight over whether the fee reduction will take effect before the merits of the lawsuit are fully considered.”

– With CBS News’ Alan Scherter reporting