The Consumer Financial Protection Bureau (CFPB) has implemented a new rule restricting credit card late fees to only $8, compared to the previous $32 average. The regulation diminishes financial burdens on consumers and highlights transparency in credit card company practices.
Annually, American cardholders are predicted to save nearly $10 billion in late fees, equal to about $200 per person. However, industry groups believe that the CFPB’s new rule could unintentionally result in more late payments, increased consumer debt, a downslide in credit scores, and restricted credit access.
Several prominent business organizations, including the U.S. Chamber of Commerce and American Bankers Association, have legally objected to this regulation. They argue that the rule goes beyond the CFPB’s legal jurisdiction and have consequently raised a collective legal disagreement with the CFPB in the U.S. District Court for the Northern District of Texas.
The objective behind these businesses’ legal action is to safeguard cardholders who regularly make payments and benefit from diverse credit card options provided by banks. This legal battle emerges as the Biden administration is actively targeting what they refer to as “junk fees.”
According to Rohit Chopra, the CFPB Director, “We’re trying to ensure that consumers, small businesses, and workers get a fair shake wherever they go.” While consumer groups have largely greeted the late fee cap with enthusiasm, business conglomerates regard the measure as politically driven.
Consequently, they are appealing to courts to challenge the enforcement of this rule. Despite the controversy, both camps are vying to assert their perspectives in court. However, finding a balance between consumer protection and business viability remains the key issue at hand.
