A federal judge in Texas has temporarily halted a Biden administration plan to scale back bank card late fees to $8 that was set to take effect next week.
The nationwide injunction imposed by Judge Mark Pittman within the Northern District of Texas is a win for the massive banks and major bank card corporations, which rake in billions in revenue annually from late fees and wanted to stop the proposal from taking effect. It’s also a victory for the U.S. Chamber of Commerce, which led the lawsuit on behalf of the banks.
The recent regulations proposed by the Consumer Financial Protection Bureau would have established one $8 cap on most bank card late fees or require banks to clarify why they need to charge greater than $8 for such a fee.
The rule would scale back the typical late bank card payment fee from $32. The bureau estimates that banks herald about $14 billion a 12 months in late fees on bank cards.
White House spokesman Jeremy Edwards said in a press release Friday evening: “We are disappointed that a court has sided with House Republicans, big banks and special interests to pause an important measure to benefit American families To save billions in junk fees.”
Banks had sued earlier this 12 months to stop the lawsuit, but when Pittman ordered the case moved to Washington, D.C., they bumped into a hurdle because few banks operated in North Texas. However, an appeals court reversed most of Pittman’s decision and ordered him to rule on the bank’s request for a preliminary injunction.
Although Pittman issued the injunction, he used a significant slice of his order to chastise the Fifth Circuit Court of Appeals for sending this case back to him after he had already decided that the case must be handled from Washington. Critics of the lawsuit called the case the most recent example of judicial “forum shopping,” wherein an organization files a lawsuit in a friendly county to have a greater probability of a good decision.
As a part of his re-election campaign, President Joe Biden has sought to spotlight his administration’s efforts to crack down on so-called “junk fees,” that are bank-related fees resembling late fees, ATM fees and overdraft fees.
“Every month that the late credit card payment rule is blocked costs Americans over $800 million,” the White House said Friday.
Banks viewed the campaign as a political fight against their business model, while consumer advocates viewed these bank fees as excessive given the chance posed by banks and bank card corporations.
“In its latest series of lawsuits aimed toward bolstering record-breaking corporate profits on the expense of everyone else, the U.S. Chamber has had its way for now — keeping families under the squeeze for somewhat longer with bank card late fees of as much as $41 devices. said Liz Zelnick of Accountable.US.
