Credit Card Late Fee Litigation

On March 5, 2024, CFPB released its final rule on credit card late fees. The final rule reduces the late fee safe harbor to $8 and eliminates automatic annual inflation adjustments for issuers subject to the reduced safe harbor amount. The $8 safe harbor only applies to issuers with 1 million or more open accounts. On March 7, 2024, ABA and its co-plaintiffs (ABA) sued CFPB seeking a preliminary, arguing the final rule: (1) violates the CARD Act by preventing issuers from collecting reasonable and proportional late fee; (2) is arbitrary and capricious under the Administrative Procedure Act (APA) because CFPB relied on incomplete and nonpublic data to estimate card issuers’ costs and failed to consider consumer costs sufficiently; (3) violates the Truth in Lending Act (TILA) by failing to implement an effective date of October 1, as required with new consumer-credit disclosures; and (4) should be set aside under the Appropriations Clause.