A group of banking and business organizations has moved to oppose a new directive set by the Consumer Financial Protection Bureau (CFPB) that would limit maximum credit card late fees to $8. The American Bankers Association, the Consumer Bankers Association, the U.S. Chamber of Commerce, and three Texas business organizations have collectively filed a lawsuit in a federal court in Fort Worth, striving to revoke the regulation.
Their argument primarily zeroed in on the assumption that such a restriction could hamper the revenue of consumer banks, thereby destabilizing their financial well-being. This, they fear, could lead to a decline in the provision of credit cards to consumers, and in turn decrease credit availability in the market affecting the overall economy negatively.
Opposing voices argue that the CFPB has overstepped its mandate by replacing an established consensus on credit card practices with an arbitrary cap on late fees. They fundamentally dispute the recent rule, accusing it would negatively affect consumer interest, and pose an imbalance in regulation.
The groups cited that late fees serve a twofold purpose. First, they act as a stimulus for timely payment. Second, they enable card issuers to manage credit risks, thereby promoting competition in terms and offers. Neglecting such incentives might lead to lax repayment habits among customers, potentially destabilizing the entire credit system.
In defense, a CFPB spokesperson stressed that the rule is designed to plug a loophole exploited by credit card companies for sizeable late fee revenue. They posit that the rule will significantly impact credit card issuers with over a million active accounts. The average late fee is expected to decrease sizably from the current $32, potentially culminating in substantial annual savings for households.
The CFPB has expressed confidence in its statutory constitutionality against the suit brought forth by the banking and business associations. It has pledged to contest the litigation vigorously and won’t bow to legal actions impeding its duty to protect consumer interests and rights.
Rob Nichols, the Chief Executive of the American Bankers Association, corroborated his organization’s stand stating that their legal action is against a rule that “exceeds the bureau’s statutory authority and, contrary to its intention, will hurt consumers rather than help them.” He emphasized the need for clear regulations which don’t “undermine the goal of serving customers and promote an environment of uncertainty.”
