Judge issues ruling on credit card late fees that ends Biden policy dream
A federal judge has overturned a rule that capped credit card late fees at $8.
The judge found the Biden-era policy to be illegal and threw it out on Tuesday.
The $8 cap, introduced in March last year by the Consumer Financial Protection Bureau (CFPB) in March last year, was put in place under a director who opposes the cap.
US District Judge Mark Pittman in Fort Worth, TX, granted a joint request by the CFPB and a coalition of business and banking groups to scrap the rule.
Pittman, who was appointed by President Trump, said the $8 cap violated the Credit CARD Act of 2009 because it prevented card issuers from charging fees 'reasonable and proportional to violations.'
Prior to that the average late payment fee from American banks was $32 per statement.
The policy was introduced as part of Biden's crackdown on consumer 'junk fees.'
A coalition of six business and banking groups including the US Chamber of Commerce and American Bankers Association sued the CFPB arguing it was overstepping its authority.
The $8 cap was introduced as part of Biden's crackdown on consumer 'junk fees.'
U.S. District Judge Mark Pittman in Fort Worth, Texas granted a request to scrap the rule
The groups also argued the rule ignored Congress' intent that fees be high enough to deter late payments and compensate card issuers for their costs.
They added that the cap was not actually good for consumers as it would force issuers to pass costs to cardholders who pay their bills on time.
The reversal comes as the Trump administration aims to reverse many of the previous president's rules and policies it sees as unfriendly to business.
In a joint statement on Tuesday, the groups called Pittman's order 'a win for consumers and common sense.'
Last year when the $8 cap was rolled out, Adam Rust, director of financial services for the Consumer Federation of America - a non-profit that campaigns for the rights of consumers - spoke out in favor of it.
'It closes the loophole that permitted this form of price-gouging and injects fairness where it has been sorely needed,' he said.
The CFA also sought to debunk a number of claims made by critics of the new rule, most notably the argument that eliminating the source of revenue for credit card issuers would harm consumers in the long run.
It also said that credit card benefits such as air miles or cashback, relished by many Americans, would remain unaffected by the cap.
These are generally offered to peiople with good credit records. Those with a poor credit score rarely receive the same benefits, it said.
