A federal decide in Texas has blocked a brand new authorities rule that might slash bank card late-payment prices, a centerpiece of the Biden administration’s efforts to clamp down on “junk” charges. 

Choose Mark Pittman of the U.S. District Courtroom for the Northern District of Texas on Friday granted an injunction sought by the banking trade and different enterprise pursuits to freeze the restrictions, which had been scheduled to take impact on Could 14. 

In his ruling, Pittman cited a 2022 determination by the U.S. Courtroom of Appeals for the Fifth Circuit that discovered that funding for the Shopper Monetary Safety Bureau (CFPB), the federal company set to implement the bank card rule, is unconstitutional. 

The rules, adopted by the CFPB in March, search to cap late charges for bank card funds at $8, in contrast with present late charges of $30 or extra. Though a bane for customers, the charges generate about $9 billion a yr for card issuers, in line with the company.

After the CFPB on March 5 introduced the ban on what it referred to as “extreme” bank card late charges, the American Bankers Affiliation (ABA) and U.S. Chamber of Commerce filed a authorized problem. 

The ABA, an trade commerce group, applauded Pittman’s determination.

“This injunction will spare banks from having to instantly adjust to a rule that clearly exceeds the CFPB’s statutory authority and can result in extra late funds, decrease credit score scores, elevated debt, decreased credit score entry and better APRs for all customers — together with the overwhelming majority of card holders who pay on time every month,” ABA CEO Rob Nichols mentioned in an announcement. 

Shopper teams blasted the choice, saying it should damage bank card customers throughout the U.S.

“Of their newest in a stack of lawsuits designed to pad document company earnings on the expense of everybody else, the U.S. Chamber received its manner for now, making certain households get price-gouged somewhat longer with bank card late charges as excessive as $41,” Liz Zelnick of Accountable.US, a nonpartisan advocacy group, mentioned in an announcement. “The U.S. Chamber and the large banks they signify have corrupted our judicial system by venue purchasing in courtrooms of least resistance, going out of their strategy to keep away from having their lawsuit heard by a good and impartial federal decide.”

In response to shopper advocates that assist the CFPB’s late-fee rule, bank card issuers hit clients with $14 billion in late-payment prices in 2019, accounting for properly over half their price income that yr. Monetary trade critics say such late charges goal low- and moderate-income customers, specifically folks of colour.

Regardless of Pittman’s keep on Friday, analysts mentioned the authorized battle over late charges is prone to proceed, with the case presumably heading to the Supreme Courtroom. 

“We consider this opens the door for the CFPB to hunt to carry the preliminary injunction if the Supreme Courtroom guidelines within the coming weeks that Congress correctly funded the company,” Jaret Seiberg of TD Cowen Washington Analysis Group mentioned in a report following the choice. “It’s why we consider this isn’t the tip of the preventing over whether or not the price lower will take impact earlier than full consideration of the deserves of the lawsuit.”

—With reporting by CBS Information’ Alain Sherter