The legal fight over credit card late fees ended with a major victory for business groups challenging Consumer Financial Protection Bureau regulations.
A federal judge in Texas has vacated a Consumer Financial Protection Bureau (CFPB) rule that would have capped most credit card late fees at $8, one day after banking and business groups reached a settlement with the agency to end their legal challenge to the regulation.
In an
order issued on April 15, U.S. District Judge Mark Pittman in Fort Worth, Texas, approved a
joint motion by the CFPB and a coalition of six industry groups—including the U.S. Chamber of Commerce and the American Bankers Association—to vacate the rule, ending a legal battle over the agency’s attempt to cap most credit card late fees at $8.
The court’s final judgment comes after months of litigation over the CFPB’s March 2024
regulation, which replaced a long-standing safe harbor framework that
allowed card issuers to charge up to $30 for a first late payment and $41 for subsequent violations. The rule, part of the Biden administration’s broader effort to crack down on so-called “junk fees,” drew immediate backlash from the financial industry, which argued that it exceeded the agency’s statutory authority and would ultimately hurt consumers.
In their
lawsuit, the plaintiffs contended that the CFPB’s rule violated the Credit Card Accountability Responsibility and Disclosure (CARD) Act by failing to allow late fees that were “reasonable and proportional” to the violation. They also argued the agency had ignored key statutory factors—such as deterrence and consumer behavior—and based the rule on flawed and non-transparent data that failed to fully reflect issuers’ costs.
“Had the CFPB properly interpreted the statute and relied on appropriate data, it would have had to conclude that the new standard does not, in fact, allow for the recovery of a ‘reasonable and proportional’ penalty fee,” the plaintiffs wrote in their complaint.
Pittman previously sided with the plaintiffs in a December 2024
ruling, granting a preliminary injunction and finding they were likely to succeed on the merits of their claims. In approving the joint motion for consent judgment this week, the court formally vacated the rule under the Administrative Procedure Act and dismissed the remaining claims in the case with prejudice, meaning the lawsuit cannot be refiled.
In a
joint statement issued after the ruling, the six plaintiff organizations welcomed the outcome, calling it “a win for consumers and common sense.”
“If the CFPB’s rule had gone into effect, it would have resulted in more late payments, lower credit scores, higher interest rates, and reduced credit access for those who need it most,” the joint statement reads. “It would have also penalized the millions of Americans who pay their credit card bills on time and reduced important incentives for consumers to manage their finances. We appreciate the CFPB’s recognition that the rule violated the law and the Bureau’s willingness to resolve our legal challenge.”
With the rule now vacated, the CFPB’s previous safe harbor thresholds—$30 for a first late payment and $41 for subsequent violations—remain in place. These amounts, which had been adjusted periodically for inflation, are still subject to the statutory requirement under the CARD Act that fees be “reasonable and proportional” to the violation.
The ruling comes as the Trump administration is rolling back a number of Biden-era regulations it views as burdensome to businesses. For instance, President Donald Trump signed an
executive order on March 14 that scrapped policies that increased the minimum wage for federal contractors and imposed global worker rights protections.
