Credit Card Late Fees Limited to $8 – Won’t Happen. TX Judge Overturns Biden’s Lesser Pay Rules, Granting Big Win for Banking Groups

A federal judge in the northern district of Texas recently overturned a Consumer Financial Protection Bureau (CFPB) regulation firmly set to restrict “excessive” late fees on credit cards to $8.

Judge Mark T. Pittman issued a previous ruling that prevented the CFPB from enforcing the fee limit and ruled that the regulation unlawfully restricted credit card companies from imposing “reasonable and proportional” charges.

The Late Fee Rule, initiated by Former president Joe Biden Administration’s attempt to cut down on “junk fees,” lowered the safe harbor fee amount for late credit card payments previously prescribed by the CARD Act. By reducing the safe harbor fee amount from $32 to $8, the Late Fee Rule would have cost the credit card industry an estimated $10 billion annually.

The lawsuit, brought forth by various business and banking organizations, including the American Bankers Association and the U.S. Chamber of Commerce, argued that the regulation established during the Biden administration would result in “irreparable harm,” decrease the availability of credit, and compel credit card issuers to shift the costs of managing late payments onto cardholders who made timely payments.

CFPB Admits to Violating Credit Card Act

Under the new Trump administration, the CFPB not only decided against fighting the lawsuit, but it also joined the coalition of businesses that requested the rule be scrapped.

“The parties agree that, in the Late Fee Rule, the Bureau violated the CARD Act by failing to allow card issuers to ‘charge penalty fees reasonable and proportional to violations,'” attorneys with the CFPB wrote in a joint motion aligned with the banking groups lawsuit to vacate the rule.

Judge Pittman’s ruling removes many previous caps from credit card late fees, per news media outlets in April 2025. Pittman’s decision converged into a flurry of court decisions involving the CFPB, as the Trump administration aims to significantly reduce the agency’s scope of operation.

The CFPB was created in the wake of the 2008 financial crisis to protect consumers from unfair, deceptive, or abusive practices by a wide range of financial institutions and businesses.

A Win for Consumers or the Credit Card Industry?

In a joint statement, the coalition called the judge’s order “a win for consumers and common sense.”

“We welcome today’s court decision vacating the CFPB’s credit card late fee rule. This is 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. 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.” Meanwhile, consumer advocates blasted the decision, saying the Trump administration’s goals are to ensure the rich get richer and punish credit card holders with less money with exorbitant late fees.

With local, regional, and major banks that collectively employ around 2.1 million people, protect $19.2 trillion in deposits, and provide $12.7 trillion in loans, the country’s $24.1 trillion banking sector is represented by the American Bankers Association.

Inflated Late Fees

“This decision will allow big banks to exploit consumers to the tune of $10 billion annually by charging inflated late fees that far exceed what late payments cost them to collect,” said Chi Chi Wu, senior attorney with the National Consumer Law Center (NCLC).

“This is yet another way that the current administration’s actions are increasing costs and straining the budgets of hard-working families while lining the pockets of wealthy corporations.”

How the $8 Cap on Credit Card Late Fees Would Operate

Congress prohibited excessive late fees on credit cards with the enactment of the Credit CARD Act of 2009; however, the CFPB asserted that credit card firms had taken advantage of a regulatory gap to enhance their profits. The late fee regulation proposed by the CFPB, derived from the Card Act, aimed to reduce the standard late fee for credit cards from roughly $32 to $8. Late fees have turned into a significant income stream for credit card companies, with the CFPB estimating these fees generated approximately $14 billion in 2022.

The new regulation did not abolish late fees; instead, it would have restricted them to what the CFPB deemed “reasonable and proportional” at that time. The regulation permitted credit card issuers to impose fees exceeding $8 if they could demonstrate that such amounts were insufficient to cover the expenses related to late payments. Furthermore, the regulation did not prevent them from implementing other measures to discourage late payments, such as increasing interest rates or cutting credit limits.

Why Late-Fee Rule Never Fully Took Action

As stated earlier, on March 7, 2024, two days after the CFPB’s rule was finalized, the American Bankers Association, Consumer Bankers Association, the U.S. Chamber of Commerce, and three other business groups filed a lawsuit in federal court challenging the new rule and asking the court to grant a preliminary injunction to stop it from going into effect later this year.

In a joint statement, the plaintiffs claimed the CFPB “exceeded its statutory authority and offered deficient analysis and reasoning to achieve a preordained outcome that will ultimately harm the consumers it is charged with protecting.” They also claimed the $8 cap on late fees is below the actual cost of covering those late payments.

Consumer advocates have always disputed that assertion.

The CFPB “did a tremendous amount of research—including an analysis of data provided by the banking industry—to determine that $8 was what it costs banks to deal with late payments,” NCLC’s Wu told Checkbook. “This is what the banks need to be made whole, $8,” Wu said. “So, when they charge a $30 late fee, they’re making lots of money, and they love those late fees.”

Pay Credit Card Bills Timely to Avoid Crazy High Interest Rates

Regardless of the late fee, it’s important to pay your credit card bills on time, every time, even if you only make the minimum payment. A late payment will dramatically lower your credit score.

A survey by Consumer Reports found that the most common reasons people paid late were they thought they already paid the bill (27 percent) or they didn’t know the due date (12 percent).

You can avoid both those problems by signing up for monthly bill reminders via text or email and enrolling in autopay. If you can’t afford to pay the entire balance (which is the smart way to use credit cards), at least have autopay set for the minimum amount. Paying the minimum counts as an on-time payment. If your budget allows, you can always pay more.

Consumer Reports advises paying digitally or over the phone rather than sending a check in the mail. It’s more secure, and you won’t have to worry about delayed mail deliveries.

If you normally pay on time but slip up once, the credit card issuer might waive the late fee if you call and ask nicely. A 2020 survey by Bankrate.com found that 82 percent of those who asked for a credit card late fee to be waived got at least some relief.

“You can’t do this every month, of course,” said Ted Rossman, Bankrate’s senior industry analyst, “but card issuers will usually give you a break if it’s an isolated event.”

Some credit cards, such as the Petal 2 Visa card, Apple Card, Citi Simplicity card, and Wells Fargo Attune card, do not charge late payment fees, according to a market analysis by Wallet Hub.

Houston News Today Senior Reporter and Assistant Editor C. Walker can be reached at Houstonnewstoday@yahoo.com. Walker is also the NewsBlaze.com senior reporter.