Court injunction pauses CFPB credit card late fee rule

A federal judge issued a temporary injunction of the Consumer Financial Protection Bureau’s final rule on credit card late fees, which was scheduled to take effect tomorrow.

Court Ruling: U.S. District Judge Mark Pittman of the Northern District of Texas issued the injunction pending a U.S. Supreme Court decision on the constitutionality of the CFPB’s funding structure.

Supreme Court Case: The high court is due to rule by the end of June on a Fifth Circuit decision that the CFPB’s funding structure violates the Constitution’s appropriations clause and separation of powers. That case has also led to an ICBA-advocated nationwide injunction of the bureau’s 1071 final rule on small-business data collection and reporting.

Rule Details: The CFPB rule:

• Cuts the credit card late fee safe harbor under the CARD Act from the current levels of $30 for the first violation and $41 for subsequent violations to $8, without inflation adjustments.

• Applies to issuers with 1 million or more open accounts, which allows the CFPB to avoid analyzing the rule under the Small Business Regulatory Enforcement Fairness Act.

• Allows covered issuers to charge fees above the threshold as long as they can prove the higher fee is necessary to cover their collection costs.

ICBA View: In a national news release after the rule’s release, ICBA said the rule sends the wrong message that punctual credit card payments are not a significant priority, which will harm consumers by leading to more late payments and additional interest charges.