On April 15, 2025, the U.S. District Court for the Northern District of Texas vacated a Consumer Financial Protection Bureau (CFPB) rule that capped credit card late fees at $8. The decision granted a joint motion, brought by the CFPB and the coalition of trade associations that had sued it, which sought a consent judgment reflecting the parties’ settlement of the case.
As noted in a previous post, in March 2024, the CFPB finalized the now-vacated rule. The rule had reduced the safe harbor limits on late fees that could be charged by large credit card issuers (those with over one million open accounts) from over $30 down to $8. The rule also forbade fee increases for repeat violations and removed the annual inflation indexing.
Days after the rule was announced, the U.S. Chamber of Commerce, the American Bankers Association, and four other trade associations brought a Texas federal case (see prior post) against the CFPB and its then director, Rohit Chopra, alleging that the late fee rule exceeded the CFPB’s authority. Specifically, the plaintiffs claimed that the rule violated both the Credit Card Accountability Responsibility and Disclosure Act (CARD Act) and the Administrative Procedure Act (APA) by forbidding fees that would “sufficiently account for deterrence or consumer conduct, including with respect to repeat violations,” and by not allowing penalty fees “reasonable and proportional to the omission or violation.” In May 2024, the district court issued a preliminary injunction blocking the rule from taking effect, and in December 2024, it found that the plaintiffs were likely to succeed in the case.
Following the change in CFPB leadership, Russell Vought, as CFPB Acting Director, was substituted for Rohit Chopra in the Texas federal suit, and on March 12, 2025, the CFPB reported to the court that it anticipated a settlement within 30 days. The parties’ joint motion for entry of a consent judgment was filed April 14, 2025, and was granted the next day. In the motion, the CFPB explicitly agreed that its $8 late fee cap had violated both the CARD Act and the APA because it did not allow credit card issuers to “charge penalty fees reasonable and proportional to violations.” The CFPB agreed to abandon the rule altogether and, with the plaintiffs, jointly requested a final court judgment vacating the rule.
This reversal by the CFPB, including its acknowledgment of the validity of its opponents’ arguments, is a clear retreat from its original regulatory position, and, like the parallel congressional efforts to revoke CFPB rules, continues the accelerating trend of federal deregulation in the consumer finance industry.
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