On April 15, 2025, Judge Mark T. Pittman of the U.S. District Court for the Northern District of Texas entered an order and final judgment vacating the CFPB's credit card penalty fees rule (the Late Fee Rule). Judge Pittman's order comes in response to an April 14, 2025, joint motion for consent judgment filed by the CFPB and plaintiffs and held that the Late Fee Rule is vacated "for failure to allow card issuers to 'charge penalty fees reasonable and proportional to violations,' in violation of the Credit Card Accountability and Disclosure Act" (the CARD Act) and Administrative Procedure Act.
The Late Fee Rule, implemented as part of the Biden Administration's attempt to cut down on "junk fees," lowered the safe harbor fee amount for late credit card payments previously prescribed by the CARD Act. By reducing the safe harbor fee amount from $32 to $8, the Late Fee Rule would have cost the credit card industry an estimated $10 billion annually.
Several trade groups and financial institutions filed a lawsuit in the Northern District of Texas challenging the Late Fee Rule on the basis that the new, lower safe harbor fee did not allow "issuers to charge fees that sufficiently account for deterrence or consumer conduct, including with respect to repeat violations" and "violate[d] the express requirements of the CARD Act." In the parties' April 14 joint motion for consent judgment, CFPB Chief Legal Officer Mark Paoletta agreed with the plaintiffs' position and Judge Pittman's previous finding that "in the Late Fee Rule, the [CFPB] violated the Card Act by failing to allow card issuers to 'charge penalty fees reasonable and proportional to violations.'" Accordingly, the CFPB requested that Judge Pittman vacate the rule and dismiss all remaining claims with prejudice.
In a statement issued on April 15, 2025, the plaintiffs called Judge Pittman's order a "win for consumers and common sense" as the Late Fee Rule "would have … penalized the millions of Americans who pay their credit card bills on time and reduced important incentives for consumers to manage their finances." The plaintiffs further indicated their appreciation for "the CFPB's recognition that the rule violated the law, and the Bureau's willingness to resolve [this] legal challenge."
The CFPB's joint motion for consent judgment, in combination with a March 2025 status report requesting a stay of all deadlines pending likely settlement, collectively support the CFPB's current affinity for abandoning or amending disputed rules, rather than litigating these claims in federal courts throughout the nation, as Holland & Knight has previously reported. The motion for consent judgment also comes on the heels of a pair of internal CFPB memos issued by Acting Director Russell Vought, previously reported on by Holland & Knight, directing CFPB staff to review and repeal any and all guidance documents issued by the CFPB imposing requirements or restrictions that extend beyond the text of the rules. As the CFPB faces challenges to its attempt to shrink the CFPB workforce, these actions and directives signal commitment to the Trump Administration's goal of reducing the agency to its statutory functions.
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