Why Texas is Right to Fight Biden’s Late Fee Rule

Last week, the Texas Association of Business, Fort Worth Chamber of Commerce, Longview Chamber of Commerce, U.S. Chamber of Commerce, and American Bankers Association sued to block the Consumer Financial Protection Bureau’s (CFPB) final rule to lower the credit card late fees cap to $8.
 
This lawsuit challenges the Biden Administration's terrible price control idea that would hurt Texans. Given the entities that sued to block this rule and the effect on Texans, the case should continue in Texas instead of moving it elsewhere as the CFPB would like.
 
Credit card late fees, what some call “junk fees,” are the cost of someone paying their bill late. Nothing is free, so there’s a charge for paying late, as it also influences the expected cash flow of credit card companies. It’s not a price gouging scheme; it’s simply a way to take the risk of giving credit to those in need while keeping cash flow for profitability.
 
This is not only important for businesses, but it also provides an incentive for people to pay their bill online. Without a market-based credit card fee, the cost will be on those who need credit the most as they won’t be able to get it or pay much higher interest rates.  
 
The Wall Street Journal Editorial Board wrote: “Even the CFPB acknowledges, the lower penalty may cause more borrowers to pay late, and as a result incur higher ‘interest charges, penalty rates, credit reporting, and the loss of a grace period.”
 
Many Texans depend on credit card access to pay their living expenses. There are more than 3 lines of credit per user in Texas. More than 3 million small businesses also rely on access to credit to grow and expand. Some card issuers most impacted by this rule, including Citi, Chase, and Synchrony, have extensive operations in Texas.
 
JCPenney, based in Plano, offers one of the country's most popular co-branded credit cards through its partnership with Synchrony. The retailer, which employs more than 2,000 Texans, is just a few years removed from bankruptcy and stands to lose big if this misguided rule is allowed to stand. Reports indicate late fees account for 14 to 30 percent of department store credit card revenue.
 
Given the current state of credit card delinquencies at a 10-year high, the CFPB’s rule would exacerbate an already dire situation. This would have far-reaching effects on our community and economy, particularly as consumers and small businesses increasingly rely on credit to navigate lower inflation-adjusted average weekly earnings by 4.2% since January 2021.
 
Most of the plaintiffs in this lawsuit are local organizations that recognize the importance of defending and preserving access to credit. Texas is the rightful venue for this battle.