Credit Card Late Fee Suit Goes Back to Texas
Appeals court rules Texas judge improperly transferred case to D.C.
A Texas federal appeals court has ordered that the lawsuit filed by the American Bankers Association and the U.S. Chamber of Commerce challenging the Consumer Financial Protection Bureau’s credit card late fee rule be returned to a Texas federal court.
The Fifth Circuit Court of Appeals ruled Friday that Judge Mark T. Pittman of the Northern District of Texas 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.
The appeals court said that Pittman essentially denied the request for an injunction by not ruling on it, saying that “simply sitting on a preliminary-injunction motion for too long can effectively deny it.”
At issue is the CFPB’s final rule that reduces most credit card late fees to $8 at institutions with more than one million open accounts. The card issuers could charge more if they demonstrate that their costs exceeded $8.
The trade groups filed the suit in Texas; the Lone Star State’s federal judges are among the most conservative in the nation. Indeed, the Fifth Circuit appeals court judges have ruled that the CFPB’s funding mechanism is unconstitutional because the agency is not funded through the appropriations process.
The groups challenging the credit card late fee rule argued that the CFPB violated federal law by giving them only 60 days to comply with the rule.
The Biden Administration and the CFPB asked that the case be transferred to the Washington, D.C. federal court, contending that the plaintiffs and their attorneys work there. Pittman agreed and ordered the case transferred.
The appeals court said that the plaintiffs deserved a quick resolution of the case, accepting their argument that providing consumers with required notices typically takes four months. The rule would be in effect by then.
“In sum, given the issuers’ unusually short timeline for complying with the Final Rule or obtaining injunctive relief, the district court effectively denied the Chamber’s motion for a preliminary injunction by not promptly ruling on it by and by instead opting to hear an unrelated motion,” the appeals court said.
A progressive group immediately blasted the appeals court for ordering the case back to Texas. “The court gave the U.S. Chamber and the big banks they represent exactly what they wanted in a case that could cost vulnerable Americans billions of dollars,” said Tony Carrk, executive director of Accountable.US. Carrk accused the Chamber of “judge shopping” by filing the case in Texas.
“It’s unfortunate for consumers that the 5th Circuit is going along with a well-known scheme by conservatives to manipulate the judicial system for political and corporate gain,” Carrk said.
While credit union trade groups have sharply criticized the CFPB’s final rule, they are not parties to the lawsuit.