Complaint to Challenge the New Rulemaking on Credit Card Late Fees

Plaintiffs, the Chamber of Commerce of the United States of America, Fort Worth Chamber of Commerce, Longview Chamber of Commerce, the American Bankers Association, the Consumer Bankers Association, and Texas Association of Business, bring this action for declaratory and equitable relief against Defendants, the Consumer Financial Protection Bureau (“CFPB”) and Rohit Chopra in his official capacity as Director of the CFPB. Plaintiffs challenge the CFPB’s new rulemaking on credit card late fees (“Final Rule” or “Rule”).

Among other things, the Final Rule—which implements a State of the Union promise the President made before the public-comment period had even commenced—slashes by 75 percent the safe harbor amount that the Federal Reserve Board of Governors (the “Board”) set for credit card late fees, which every CFPB director has since maintained. The Rule, which upends more than a decade of regulations, is unlawful. Its promulgation by the CFPB, moreover, violated the Appropriations Clause.

The concept of attaching consequences to the failure to pay an obligation is ubiquitous in our legal system. Credit card obligations are no different: Congress has recognized that credit card late fees appropriately serve three commonsense, important purposes: deterring late payments, accounting for cardholder conduct, and compensating credit card issuers for the costs they incur when payments are late. See 15 U.S.C. § 1665d(c). Congress also expressly authorized penalty fees for late payments and directed the Board—and now the CFPB—to take each of these criteria into account when ensuring that such fees are reasonable and proportional to the omission or violation of the credit card agreement. Id. § 1665d(b)-(c).

The CFPB, however, has now apparently decided that such penalty fees are “junk fees” and has instead limited issuers to collecting late payment fees that compensate them only for a subset of their costs. This is a sharp break both from the statute and from more than ten years of regulations interpreting it. In taking these actions, the CFPB violated the Appropriations Clause, exceeded its statutory authority, and offered deficient analysis and reasoning, all in order to achieve a pre-ordained outcome that will ultimately harm those consumers the CFPB is charged with protecting. To top it off, the CFPB adopted an effective date that violates yet another statute and that exposes issuers to immediate and irreparable harm. This Court should vacate the Final Rule.

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