In a recent development, the Trump administration has urged a federal court to discard a regulation that limits credit card late fees to $8.
This move aligns with the stance of business and banking groups, who have argued in a lawsuit that the rule is unlawful.
The U.S. Consumer Financial Protection Bureau (CFPB) and the business groups that initiated the case have requested U.S. District Judge Mark Pittman in Fort Worth, Texas, to issue a final order to terminate the late fee rule.
According to Thomson/Reuters, Judge Pittman had previously prevented the CFPB from enforcing the rule, which was a component of President Joe Biden's wider initiative to clamp down on "junk fees." Although the Trump administration, known for its conservative approach, could have defended the rule on appeal, it chose not to do so.
The CFPB and the U.S. Chamber of Commerce, the leading party in the lawsuit, have yet to comment on the matter. Trump's attempts to dismantle the CFPB have been somewhat thwarted in court. A federal appeals court ruled last Friday that while the administration could lay off workers at the agency, it could not completely eliminate it.
The CFPB, a consumer finance watchdog established in the wake of the global financial crisis, has been a frequent target of Republicans. They argue that the bureau is unaccountable and oversteps its legal boundaries with enforcement cases against financial companies. The late fee regulation in question would have restricted card issuers with over 1 million open accounts from charging more than $8 for late fees unless they could demonstrate that higher fees are necessary to cover their costs.
Judge Pittman, appointed by Trump during his first term, stated in December that the rule contravened the Credit Card Accountability and Disclosure Act. This 2009 U.S. law was designed to shield consumers from unfair practices by card issuers. The law regulated excessive fees but permitted card issuers to impose "penalty" fees when a customer breached a credit card agreement, including by failing to make a payment on time, Pittman explained.
The Trump administration's request to discard the late fee regulation reflects its conservative perspective, emphasizing limited government intervention and free-market economics. This move is seen as a pushback against the Biden administration's attempt to regulate "junk fees," which some argue infringes on the freedom of financial companies to set their own fees based on their costs.
The outcome of this case could have significant implications for consumers and financial companies alike. If the court agrees with the Trump administration and business groups, credit card issuers may be able to charge late fees that exceed the $8 cap, provided they can justify the higher fees.
On the other hand, if the court upholds the rule, it could set a precedent for further regulation of fees in the financial industry. This case serves as a reminder of the ongoing debate over the role of government in regulating business practices and the balance between consumer protection and free-market principles.
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