Resolution Regarding Litigation Challenging CFPB Rule Capping Late Fees May Have Lasting Impact.

The litigation, which had been pending for over a year, filed by the Chamber of Commerce of the United States of America and others against the Consumer Financial Protection Bureau (“CFPB”) and former Director Rohit Chopra (amended to name current Acting Director Russell Vought as a Defendant) regarding the CFPB’s Rule capping credit card late payment fees has come to a conclusion.

U. S. District Court Judge Mark T. Pittman, for the Northern District of Texas, issued an Order and Final Judgment vacating the Rule capping credit card late fees to $8.

We have been keeping an eye on this litigation since it was filed in March of 2024 and our prior blog posts here, here, and here can be reviewed for background regarding enactment of the Rule and the history of the case.

Resolution of the litigation is not the only noteworthy news regarding this case; equally interesting is the road taken in getting to the final judgment, which could have a long-lasting impact on the CFPB and other pending litigation.

 The enacted Rule sought to remove a safe-harbor provision that presumed the credit card companies’ fee calculations were reasonable and proportional to the late payment and capped the fees to the lesser of $8 or the actual cost incurred by the credit card companies.

The Chamber of Commerce and CFPB filed a joint motion for entry of a consent judgment to conclude the case, which included a stipulation that the CFPB violated the law by precluding credit card companies from considering deterrence and/or consumer conduct, with regard to repeat violations, in establishing a “reasonable and proportional” fee for late payments. The joint motion seemingly codifies the right of entities subject to the CFPB’s authority to consider deterrence and punishing repeat offenders in setting fees subject to CFPB scrutiny.

We anticipate the order and final judgment will impact nearly all of the litigation challenging other recently enacted rules of the CFPB.  Additionally, the consent judgement may tie the hands of future directors in how they can seek to limit the actions of companies through the Rule making process the next time there is an administration change.