On Thursday, the American Banker Association joins a lawsuit against the Consumer Financial Protection Bureau (CFPB) challenging the agency’s new rule limiting credit card late fees.
The suit, originally filed by the U.S. Chamber of Commerce, the Fort Worth Chamber of Commerce, the Longview Chamber of Commers, Consumer Bankers Association and the Texas Association of Business, seeks a preliminary injunction barring the implementation of the new rule.
“The CFPB’s action to cap credit card late fees below banks’ actual costs exceeds its authority and would result in more late payments, increased debt, reduced credit access and higher APRs for all consumers – including the vast majority of card holders who pay on time each month,” ABA President and CEO Rob Nichols said. “Once again, we have reluctantly been forced to sue a federal regulator because the CFPB has ignored industry and other stakeholder comments demonstrating that this rule exceeds the bureau’s statutory authority and will hurt rather than help consumers. This rule is about politics not policy, and we look forward to the court’s review.”
The lawsuit claims the CFPB’s March 5 ruling to restrict credit card late fees violated the Appropriations Clause and exceeded the CFPB’s statutory authority. The rule slashes the safe harbor amount that the Federal Reserve set aside for those fees by 75 percent and upends more than 10 years of regulation, the groups alleged.
“In taking these actions, the CFPB violated the Appropriations Clause, exceeded its statutory authority, and offered deficient analysis and reasoning, all in order to achieve a pre-ordained outcome that will ultimately harm those consumers the CFPB is charged with protecting. To top it off, the CFPB adopted an effective date that violates yet another statute and that exposes issuers to immediate and irreparable harm. This Court should vacate the Final Rule.”