US consumer agency sued by banks, US Chamber over credit card late fee cap

investing.com:

By Jonathan Stempel

(Reuters) — The Consumer Financial Protection Bureau was sued on Thursday over its new rule capping late fees on credit cards at $8, which banking groups and the U.S. Chamber of Commerce say punishes consumers who pay their bills on time.

In a complaint filed in the Fort Worth, Texas, federal court, the fee's opponents accused the bureau of exceeding its authority, and ignoring Congress' intent that fees be high enough to deter late payments, ensure cardholder accountability, and compensate issuers for their costs when payments are late.

The plaintiffs include the Chamber, the American Bankers Association, the Consumer Bankers Association, and three Texas-based trade groups.

In a statement, the consumer bureau pledged to defend the rule, saying it «closes a longstanding loophole abused by credit card giants to turn late fees into a major revenue stream,» and will save American consumers more than $10 billion.

Credit card late fees have been a boon to issuers, totaling more than $14 billion in 2022 as the average fee swelled to $32, the bureau estimated.

The new rule caps fees for issuers with more than 1 million open accounts, unless they can prove higher fees are necessary to cover their costs, and end what the bureau called «abuse» of an automatic adjustment for inflation.

More than 95% of outstanding credit card balances are expected to be covered. CFPB Director Rohit Chopra has characterized the higher fees as «junk fees.»

In Thursday's complaint, opponents said capping late fees would cause irreparable harm through higher card losses and compliance costs for issuers, including on accounts they would have never opened had they known about the cap.

«The agency's own analysis has found that by