A Texas judge is set to rule on whether to block new government rules sharply limiting credit card late-payment charges, a centerpiece in the Biden administration’s efforts to clamp down on “junk” fees. 

The regulations, adopted by the Consumer Financial Protection Bureau in March, would cap late fees for credit card payments at $8, a fraction of late charges that can top $30. Although a bane for consumers, the fees generate about $9 billion a year for card issuers, according to the agency.

Judge Mark Pittman of the U.S. District Court for the Northern District of Texas was given a May 10 deadline to decide whether to grant an injunction sought by the banking industry and other business interests preventing the restrictions now scheduled to take effect on May 14.

After the CFPB on March 5 announced the ban on what it called “excessive” credit card late fees, the American Bankers Association and U.S. Chamber of Commerce filed a legal challenge. 

Tobin Marcus, lead policy analyst at Wolfe Research, thinks the industry will succeed in stalling the rule, setting up what could be a protracted trial ahead of a final court decision. “Our expectation is that [Judge Pittman] will grant the motion for a preliminary injunction,” he said.

“Then there’s the longer process of having a trial in service of a final decision,” the analyst added.

Both the Chamber of Commerce and the CFPB on Friday declined to offer comment. 

As the legal battle plays out in court, credit card issuers are mapping out ways to counter what they expect to be a sharp drop in fee revenue, including potentially hiking interest rates or adding fees for other services. 

According to consumer advocates that support the CFPB’s late-fee rule, card issuers hit customers with $14 billion in late-payment charges in 2019, accounting for well over half their fee revenue that year. Financial industry critics say such late fees target low- and moderate-income consumers, in particular people of color.

“The CFPB’s March 2024 rule sets reasonable limits on credit card late fees, ensuring that consumers are not unfairly penalized for minor delays in payment,” a coalition of 90 national and state advocacy groups said in an April 24 letter to lawmakers. “By capping late fees at no more than $8, and eliminating automatic further fee increases tied to inflation, the rule addresses the predatory practices that have allowed credit card companies to take billions of dollars from hard-working Americans through back-end fees.”