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Court Halts Implementation of Regulation Restricting Credit Card Overdue Charges

A recent ruling from the court has stopped the enforcement of a guideline from the Consumer Financial Protection Bureau (CFPB) aimed at limiting credit card overdue charges. The regulation, originally set to become effective this week, has been put on hold following a legal dispute brought forward by the U.S. banking sector.

Judge Mark Pittman from the Northern District of Texas has granted an interim order in response to petitioners, which include the U.S. Chamber of Commerce, pausing the implementation of the regulation. This ruling postpones the enforcement of measures that sought to cap the fees imposed by credit card companies for late payments, potentially resulting in significant yearly savings for American households.

According to the proposed guideline, overdue charges, which typically amount to $32 per instance, would have been capped at $8 each, with restrictions placed on the industry’s capacity to increase these charges. However, the court’s decision has introduced uncertainty regarding the timeframe for implementing the regulation.

The CFPB had estimated that the regulation could lead to yearly savings of $10 billion for consumers. Nonetheless, the delay implies that consumers might still encounter substantial monthly overdue charges totaling $800 million, as stated by a CFPB representative. The White House has expressed dissatisfaction with the court’s verdict, emphasizing President Biden’s dedication to shielding consumers from excessive charges.

The CFPB contends that credit card providers have disproportionately gained from high overdue penalties, particularly affecting individuals with poor credit ratings. Conversely, trade organizations within the industry argue that fee limits could unfairly burden consumers who consistently settle their bills on schedule.

In response to the court’s ruling, the Consumer Bankers Association has embraced the motion and revealed intentions to further challenge the regulation in court. The association aims to completely dismiss the CFPB’s regulation on late charges.

The ruling underscores the ongoing conflict between consumer supporters seeking fee reductions and industry stakeholders safeguarding their earnings. With legal inquiries advancing, consumers may confront ongoing uncertainty regarding potential savings resulting from reduced overdue charges.

Image Source: Pormezz / Shutterstock

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