Credit Card Late Fee Lawsuit Bouncing Between D.C. and Texas

Appeals court again says lawsuit belongs in Lone Star State

The lawsuit challenging the Consumer Financial Protection Bureau’s credit card late fee rule appears to be stuck somewhere between Fort Worth, Texas and the nation’s capital.

On Tuesday, Judge Mark Pittman of the U.S. District Court for the Northern District of Texas attempted, for the second time, to transfer the lawsuit filed by the U.S. Chamber of Commerce, the American Bankers Association, and others, to the U.S. District Court for the District of Columbia.

On Wednesday, the Fifth Circuit Court of Appeals blocked that order until June 18. They gave no reason when they issued an administrative stay.

It was in March that the CFPB issued a final rule on credit card late fees, decreasing most of those fees to $8. The Chamber, the ABA, and others, filed suit in Texas almost immediately, contending that the CFPB was exceeding its authority and pointing out that the Fifth Circuit Court of Appeals had found that the CFPB’s funding mechanism was unconstitutional.

Critics, such as the progressive group, Accountable.US, charged that the plaintiffs were forum shopping, since Texas federal courts (especially the Fifth Circuit) have a decidedly conservative bent and generally are not fans of strict regulatory regimes. The CFPB argued that the case should have been filed in Washington, D.C. and Pittman agreed.

However, the appeals court disagreed, ruling that Pittman erred when he approved transferring the lawsuit to the U.S. Circuit Court for the District of Columbia before deciding whether an injunction should be issued blocking implementation of the rule.

On May 10, Pittman issued an injunction barring implementation of the rule, citing the Fifth Circuit’s decision finding the CFPB’s funding mechanism unconstitutional. On May 16, the U.S. Supreme Court overturned the Fifth Circuit’s decision.

With the Fifth Circuit’s ruling about the CFPB’s constitutionality no longer a factor in the case, Pittman, on Tuesday, attempted to move the case back to the nation’s capital. He said that both defendants and three of the six plaintiffs reside in Washington. He added most of the ten attorneys involved in the case list their offices in the nation’s capital.

“This means that any proceeding this Court conducts (such as a preliminary injunction hearing) will require all of Defendants’ counsel and two-thirds of Plaintiffs’ counsel to travel to Fort Worth—a task that will be charged to their clients or to the government,” he wrote. “This would mean that taxpayers, including residents of Fort Worth, would foot an unnecessarily expensive bill for this litigation.”

In an apparent attempt at humor, Pittman added a footnote to his decision, stating, “Fort Worth would undoubtedly welcome any of the member banks and credit card issuers to our fast-growing and vibrant city should they decide to relocate here. To get the process started, see City of Fort Worth, Business Services.”

With the administrative stay, it remains to be seen where the case will be argued. The location of the lawsuit may be crucial to its outcome, and minimally, to whether the final rule will go into effect before the 2024 election. As evidenced by the Fifth Circuit’s overturned decision on the constitutionality of CFPB funding, keeping the case in Texas may mean, at the least, a long litigation process.