As promised, the Chamber of Commerce, along with a number of other banking trade groups — including some from Texas — filed a lawsuit yesterday against the Consumer Financial Protection Bureau, saying the regulator overstepped its authority it issuing a rule capping late fees that can be charged for missed credit card payments.
The Bureau this week announced a rule that would cap most credit card late fee payments at $8, determining that was what it cost credit card issuers to collect on unpaid debts. Large card issuers are allowed to charge more than $8, but must show why their collection costs are higher to justify charging more.
After it was announced, the Chamber of Commerce said it would be filing a lawsuit to challenge the rule. The chamber is being joined by the American Bankers Association, the Fort Worth Chamber of Commerce, the Longview Chamber of Commerce, the Consumer Bankers Association, and the Texas Association of Business. The complaint was filed in the District Court for the Northern District of Texas, which was definitely not a jurisdiction that was picked at random.
Along with accusing it of overstepping its regulatory authority, the plaintiffs say the rule will result in more late payments, higher debt loads, will lower credit scores, and reduce access to credit.
“This rule effectively denies issuers the ability to do the very thing that Congress permitted them to do —charge a reasonable and proportional penalty fee for late payments, one that accounts for deterrence, the conduct of the cardholder, and costs to the issuer,” the groups said in their complaint. “This dramatic change is not consistent with the statutory text, and it was not the product of reasoned decision-making. Rather, it is part of a rushed and predetermined effort by President Biden to cap and eliminate a host of unpopular ‘junk fees.’ ”
The rule is pitting consumer advocates who are lined up with the CFPB against businesses and industry, who are aligned with the chamber in its fight against the rule.