Biden Administration: Opposition Seeking Friendly Judge to Block Credit Card Rule
The CFPB and Justice Department argue forum shopping should stop lawsuit.
The Biden Administration says the U.S. Chamber of Congress, the American Bankers Association, the Consumer Bankers Association, and state business groups, sought a friendly court when they filed a lawsuit challenging the Consumer Financial Protection Bureau’s final credit card late fee rule.
Texas federal courts have a decidedly conservative bent and generally are not fans of strict regulatory regimes. Referring to the case, filed in the U.S. District Court for the Northern District of Texas, the CFPB and Justice Department attorneys said that the case was filed “by an assortment of industry associations, many of which are located more than a thousand miles away, in Washington, D.C.”
The government attorneys wrote that one of the plaintiffs, the Fort Worth Chamber of Commerce in Texas, claims to represent a Utah bank. “Far-flung entities cannot just pay membership fees to an association in their venue of choice to gain access to that venue,” the government attorneys argued.
Summarizing their arguments, the government attorneys wrote, “In short, Plaintiffs are not likely to succeed on the merits because their apparent attempt at forum shopping fails and this case should be dismissed for improper venue.”
The financial and business groups filed suit within days of the issuing of the credit card late fee final rule by the CFPB, challenging the rule and asking for an injunction blocking the rule from being implemented. Without an injunction, the rule will go into effect 60 days after it is published in the Federal Register.
Credit card issuers with at least one million open accounts will be affected by the rule; the CFPB estimated that those issuers account for 95% of open credit card accounts. Late payments for accounts at these card issuers will be capped at $8. Card issuers that can demonstrate that their costs exceed the $8 called for in the rule could charge more, as long as they were able to justify the charges.
In their suit, the rule’s opponents contend that Congress specifically authorized the use of penalties for late payments. The government attorneys claim that the CFPB is eliminating a regulatory safe harbor that allowed financial companies to charge late fees of billions of dollars in excess of their cost.
“The rule, and reducing unjustified fees, will help working Americans pay for their food, medicine, and rent, while the large card issuers will still likely collect well more than $100 billion in interest and fees per year,” the government attorneys wrote.
They wrote that the burden of credit card late fees often falls on the poorest consumers and that an injunction blocking the rule would frustrate policy decisions made by Congress and regulators. For instance, the CFPB said that in 2019, nearly half of all accounts held by consumers with the lowest credit scores were charged three or more late fees.