On April 15, the U.S. District Court for the Northern District of Texas vacated the CFPB’s Credit Card Late Fee Rule pursuant to a joint motion for entry of consent judgment reached by the parties. The court found the CFPB’s rule failed to allow card issuers to charge penalty fees that are “reasonable and proportional to violations,” in violation of both the Credit Card Accountability and Disclosure Act (the CARD Act) and the APA. This decision followed an agreement between the parties that the rule violated the CFPB’s statutory authority under the CARD Act and the APA by not adequately accounting for deterrence when calculating the safe harbor fee amount. Both parties agreed the CFPB could not rectify the rule’s defect upon remand, leading to vacatur of the rule. Pursuant to the parties’ joint motion, the court dismissed the remaining counts raised in the complaint with prejudice.
As covered last month by InfoBytes, the CFPB had filed a status report asking for more time to consider its position on the rule. The Credit Card Late Fee Rule would have amended TILA and Regulation Z by lowering typical credit card late fees from $30 to $8.
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