In early March The Consumer Financial Protection Bureau (CFPB) finalized a rule to cut excessive credit card late fees by closing a loophole exploited by large card issuers in the US.

The rule will curb fees that cost American families more than $14 billion a year.

The CFPB estimates that American families will save more than $10 billion in late fees annually once the final rule goes into effect by reducing the typical fee from $32 to $8.

This will be an average savings of $220 per year for the more than 45 million people who are charged late fees.

“For over a decade, credit card giants have been exploiting a loophole to harvest billions of dollars in junk fees from American consumers,” said CFPB Director Rohit Chopra at the time. “Today’s rule ends the era of big credit card companies hiding behind the excuse of inflation when they hike fees on borrowers and boost their own bottom lines.”

Not so fast…

However, that ruling is now being challenged as the U.S. Chamber of Commerce filed a lawsuit against the CFPB to stop it from implementing the new rule.

The suit alleges that the CFPB rule exceeded its statutory authority in making this ruling and relied on deficient analysis and reasoning.

“American consumers benefit from a variety of credit cards that best suit their needs, and a large majority of credit card users understand the requirement to pay their credit card bills on time in addition to the costs that come with a late payment,” explains Neil Bradley, U.S. Chamber executive vice president, chief policy officer, and head of strategic advocacy.

“By significantly limiting late fees, the CFPB is not only discouraging responsible credit card use but also imposing higher costs on consumers and limiting choices in credit card options and benefits.”

Specifically, the U.S. Chamber are suing the CFPB for:

1. Violating the Credit Card Accountability Responsibility and Disclosure Act (CARD Act) of 2009 by preventing issuers from collecting reasonable and proportional late fees when cardholders don’t pay their bills on time;
2. Violating the Administrative Procedure Act (APA) by promulgating a final rule that is arbitrary and capricious, relying on secret data collected from only the largest banks for a different purpose and by a different agency; and
3. Issuing the rulemaking with funds drawn in violation of the U.S. Constitution’s Appropriations Clause.

“The agency’s own analysis has found that by limiting late fees, associated costs will be passed onto all credit card users, even those who have never made a late payment,” continues Bradley.

“The CFPB is acting outside its authority and the Chamber’s lawsuit seeks to protect American cardholders who pay their bills on time and enjoy the numerous benefits of diverse credit card offerings from America’s financial institutions.”

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