The Consumer Financial Protection Bureau (CFPB or Bureau) agreed to vacate its controversial credit card late fee rule in a joint motion for entry of consent judgment filed in Chamber of Commerce of the United States of America v. CFPB this week. This significant move comes after the U.S. District Court for the Northern District of Texas found that the rule likely violated the Credit Card Accountability and Disclosure Act (CARD Act). The consent judgment marks a pivotal resolution in the case, with the CFPB acknowledging that the rule failed to allow card issuers to impose penalty fees that are “reasonable and proportional” to violations, as required by the CARD Act.
As discussed here, the dispute centered on the CFPB’s final rule issued on March 5, 2024, which amended 12 C.F.R. § 1026.52(b) to reduce the safe harbor for late fees from $30 for the first missed payment and $41 for subsequent late payments to $8, and to eliminate the provision permitting annual adjustments to the safe harbor amount for inflation. The plaintiffs argued that this rule exceeded the CFPB’s statutory authority under the CARD Act.
On February 10, 2025, the court ordered the CFPB to explain its plans for proceeding with the case, following the new leadership’s directive to cease all supervision and examination activities. The CFPB’s status report expressed optimism about reaching an agreement within 30 days, which has now culminated in this week's consent judgment.
Joint Motion:
The joint motion filed this week requests the court to vacate the Credit Card Late Fee Rule and dismiss all other claims with prejudice. The parties agreed that the rule violated the CARD Act by not allowing card issuers to charge penalty fees that account for deterrence and consumer conduct. The court’s previous order on the plaintiff’s preliminary injunction motion found that the plaintiffs had a strong likelihood of success on the merits, leading to this significant resolution.
In that order, the court stated, “The Late Fee Rule is contrary to law, in violation of the Administrative Procedure Act, 5 U.S.C. § 706(2),” and agreed with the plaintiffs that the rule “prevents card issuers from actually imposing penalty fees.” The CFPB acknowledged that the rule failed to meet the statutory requirements, stating, “The Bureau respects this Court’s ruling and agrees that the Final Rule did not adequately account for deterrence in calculating the amount of the safe harbor fee.”
The court’s order also emphasized the importance of adhering to statutory mandates, noting, “When an agency action is contrary to law, the default rule is that vacatur is the appropriate remedy.” The CFPB and plaintiffs jointly requested the court to vacate the rule and dismiss the remaining claims with prejudice, ensuring that the Bureau will not argue issue or claim preclusion in future challenges to other regulations.
Monday, the court issued an order granting the joint motion, vacating the Credit Card Late Fee Rule, and dismissing all other claims in the plaintiffs’ complaint with prejudice.
