Trade Groups Ask Appeals Court to Block Credit Card Late Fee Rule
CFPB asks Texas District Court judge to transfer case to D.C. District Court
The U.S. Chamber of Commerce, the American Bankers Association and state trade groups have asked a Texas federal appeals court to issue an immediate order delaying implementation of the Consumer Financial Protection Bureau’s credit card late fee rule.
In a request filed with the Fifth Circuit Court of Appeals, the groups said they “understand that they are requesting urgent relief, but unfortunately, have no other option to protect their rights given the CFPB’s unlawfully rushed effective date and the millions of dollars that issuers must spend to come into compliance.”
The groups had asked Judge Mark T. Pittman of the U.S. District Court for the Northern District of Texas to issue an injunction blocking the rule, but he refused and questioned why the case was filed in his court when only one of the plaintiffs had any connection to the Lone Star State.
Citing the tenuous tie to Texas, the CFPB and the Biden Administration have requested that Pittman approve the transfer of the case to the U.S. District Court for the District of Columbia. The government attorneys defending the CFPB rule have accused the plaintiffs of forum shopping,
Notably, the Fifth Circuit Court of Appeals is the same court that had ruled that the funding mechanism for the CFPB is unconstitutional because the agency is not funded through the annual appropriations process. The CFPB appealed that ruling and the case is now before the U.S. Supreme Court.
In their appeals court request, the plaintiffs contend that the CFPB violated federal law by giving them only 60 days to implement the rule.
The groups said that the final rule requires credit card issuers representing 95% of the market to update the printed and electronic disclosures that each new card user must receive, as well as millions of periodic disclosures to existing cardholders. “Because approving new disclosure language and ordering new materials takes months, credit card issuers covered by the final rule must begin that costly process now,” they said. They added that based on that timeline, notices would need to be received by customers by March 29.
They pointed out that after they send out notices concerning the new rule, an injunction still could be issued, and new notices would need to be sent to consumers. That could cause “immense customer confusion, potential loss of customer goodwill, and millions of dollars of costs for new notices.”
In its filing, the CFPB and the administration responded that they doubt that the credit card issuers will need an extended amount of time to implement fee changes. “When credit card issuers have wanted to change any account-opening disclosures to increase fees, they have updated both digital and printed materials quickly and without complaint.”
Explaining their reasons for asking for the case to be transferred to D.C. federal court, the defendants noted, “It would be more convenient to resolve this case in the district where the bureau promulgated the regulation, and where the majority of the litigants—three of the Plaintiffs and all Defendants—and nearly all the attorneys reside.”
The rule that is being litigated would affect credit card issuers with at least one million open accounts. Most late fees would be capped at $8, although issuers could charge more if they can demonstrate that their costs exceed that amount.