DALLAS–The Consumer Financial Protection Bureau has reached an agreement with numerous plaintiffs to settle a lawsuit over its rule on credit card late fees.

The case in the U.S. District Court for Northern Texas involves the CFPB’s final rule issued on March 5, 2024 that sought to reduce the safe harbor for late fees from $30 for the first missed payment and $41 for subsequent late payments (within six billing cycles) to $8, and prohibited adjustments for inflation. The case has been batted back and forth between courts in Washington and Texas.

The plaintiffs, which h include the Fort Worth Chamber of Commerce and the American Bankers Association, challenged the CFPB’s rule under the Administrative Procedure Act, arguing that it exceeded the CFPB’s statutory authority under the Credit Card Accountability and Disclosure Act (CARD Act).

Credit unions, which were not a party in the litigation, have also opposed the CFPB rule.

Terms of Settlement

Under the terms of the settlement, the bureau 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 parties asked the court to vacate the final rule. The judge must approve the agreement.

What it Means

Brandy Bruyere, regulatory compliance attorney and partner at Honigman, LLP, said in a LinkedIn post that, “This means we’re back to the safe harbor, which was previously adjusted annually for inflation. It’s unclear whether the CFPB will make any adjustment to the current threshold as the CARD Act allows. The safe harbor in the regulation (as written prior to this rule being vacated) is $30 for the first late payment and $41 if an additional late payment occurs in the same six- month cycle as the first late pay.”

DCUC Praises Settlement

“The Defense Credit Union Council praised the settlement.”This settlement represents a critical step forward in reforming regulatory overreach that would have significantly hindered credit unions’ ability to serve their members effectively,” DCUC President and CEO Anthony Hernandez said in a statement. “The CFPB’s final rule not only exceeded its statutory authority under the Credit CARD Act but also posed a direct threat to the financial well-being of millions of Americans—including those in vulnerable and underserved communities.”

The DCUC noted it had opposed the CFPB rules

Prior to the suit, DCUC had voiced its concerns on the CFPB’s rule and the obstacles it would introduce to defense credit unions dedicated to serving the financial needs of their members.

“Overly burdensome regulations like the CFPB’s late fee rule not only threaten those tools but also risk worsening financial discipline, increasing costs, and reducing access to credit,” DCUC Chief Advocacy Officer Jason Stverak. “While we support reasonable limits, the market—not one-size-fits-all mandates—remains the best regulator for our military families’ financial well-being.”

Would Have Created Disproportionate Harm

“These outcomes would have disproportionately harmed those with limited financial means, including military families, veterans, and individuals in rural or low-income areas—many of whom rely on credit unions for fair, transparent, and mission-driven financial services,” Hernandez added in a statement. “We believe this resolution is a positive step toward restoring common-sense regulation that enables financial institutions, including credit unions, to continue providing responsible credit access, financial education, and long-term security to the communities they serve.”

America’s Credit Unions Issues Statement

“As trusted financial partners, credit unions offer consumers affordable and safe credit card programs,” Jim Nussle, president and CEO of America’s Credit Unions said in a statement. “The credit card late fees rule would have upended that system and increased costs for all cardholding members, while also decreasing the availability of credit for those who need access the most. Credit unions were clear with their concerns about the negative impact of the CFPB’s credit card late fees rule, and we appreciate the CFPB agreeing to settle the lawsuit challenging the rule and vacate it. America’s Credit Unions will continue to advocate for policies that allow credit unions to support the financial well-being of their 142 million members.”