The Trump administration agreed with plaintiffs that the rule was illegal
of ConsumerAffairsApril 16, 2025
Key takeaways
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Court Overturns CFPB Rule on Overdraft Fees: A federal court in Texas vacated a Biden-era Consumer Financial Protection Bureau (CFPB) rule that capped credit card overdraft fees at $8. The court’s decision followed a settlement between the CFPB and several plaintiffs.
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Legal Grounds for the Overturning: The CFPB acknowledged it overstepped its authority under the Credit Card Accountability Responsibility and Disclosure Act and violated the Administrative Procedure Act. The Trump administration supported the plaintiffs, leading to the CFPB requesting the court to nullify the rule.
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Stakeholder Reactions and Impact: The plaintiffs claimed the rule would have negatively affected consumers by increasing late payments and reducing credit access, especially for those with low credit scores.
A federal court in Texas has vacated the Consumer Financial Protection Bureaus rule on credit card late fees a day after the American Bankers Association and other plaintiffs reached an agreement with the bureau to end a lawsuit over the rule.
ABA last year joined the U.S. Chamber of Commerce and other plaintiffs in challenging the rule in U.S. District Court for Northern Texas, arguing the bureau exceeded its statutory authority. Under the terms of the settlement, the CFPB acknowledged it exceeded its authority under the Credit Card Accountability Responsibility and Disclosure Act, and that the late fee rule violates the Administrative Procedure Act. The CFPB asked the court to vacate the rule, which it did.
The rule, issued during the Biden administration, limited overdraft fees to $8, after determining that amount was the actual cost of processing an overdraft. In other words, the bureau ruled that banks could not make a profit on overdrafts. Some banks charged more than $30.
In a joint statement, ABA and the other plaintiffs welcomed the courts decision.
This is a win for consumers and common sense, the plaintiffs said. If the CFPBs 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.
Under the Biden administration, the CFPB said the rule would save U.S. consumers an average of $220 a year.
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