On Friday, the CFPB issued a final rule that revises the 2009 Credit CARD Act to exclude pre-account fees, such as application fees, from rules limiting fees during the first year after an account is opened.
The 2009 Credit CARD Act limits the fees charged by credit card companies after the first year the account is opened to 25 percent of the account’s initial credit limit. The move by the bureau reverses a 2011 decision by the Federal Reserve Board of Governors, which ruled that the limitations apply prior to account opening as well as during the first year after an account is opened.
Just after the Fed amended the rules, First Premier Bank challenged the decision, leading the U.S. District Court for the District of South Dakota to grant a preliminary injunction to prevent the amendment from taking effect.
“Many members of the public opposed the…rule, arguing that amending…would reduce protections for vulnerable consumers,” the CFPB said, according to eCreditDaily. “Some of these commenters suggested that the Bureau pursue other means of limiting pre-account opening fees, such as writing additional rules, coordinating examination activities, or bringing enforcement actions. The Bureau takes seriously the concerns raised by commenters, particularly with respect to the effect that rule may have on vulnerable consumers. The Bureau believes, however, that the final rule is necessary to resolve the uncertainty created by the South Dakota litigation…”