Banks Seek Pause on CFPB Late Fee Rule Ahead of Venue Decision

The US Chamber of Commerce and banking trade groups asked a federal judge to pause a Consumer Financial Protection Bureau rule capping credit card late fees before the judge rules on whether the case belongs in Texas.

Banks and other credit card issuers don’t have time to wait for a ruling on the case venue because the CFPB’s regulation capping credit card late fees at $8 is set to take effect on May 14, the Chamber and its co-plaintiffs said in a motion filed late Tuesday in the US District Court for the Northern District of Texas. Late fees can be $30 for the first missed payment and $41 for any missed payment in the subsequent six months under existing rules.

Credit card issuers will have to ensure customers receive disclosures by March 29 outlining the changes required by the rule, making it vital for the court to rule by March 22 on the plaintiffs’ request for a preliminary injunction temporarily blocking the new late fee cap, the motion said.

“Plaintiffs face the loss of millions of dollars in unrecoverable compliance costs if the Final Rule is not enjoined,” said the industry groups, including the US Chamber of Commerce, the American Bankers Association, the Consumer Bankers Association, and the Fort Worth Chamber of Commerce. If the court denies their motion for an early injunction, the plaintiffs said they planned to go to the Fifth Circuit to get an order requiring the case to stay in Fort Worth, as well as a temporary pause on the rule.

The fight over over the proper forum to challenge the CFPB’s credit card late fee rule is part of a broader battle over alleged venue shopping by corporate interests and activists seeking to block federal policies.

Judge Mark Pittman, a Trump appointee overseeing the credit card late fee rule challenge, said in a Monday order he had “concerns” about whether the Fort Worth Division of the Northern District of Texas was the appropriate venue “given only one plaintiff of the six in this matter has even a remote tie to the Fort Worth Division.”

Rule Fight

The CFPB’s rule, finalized March 5, covers banks and other credit card issuers with more than 1 million open accounts, including Capital One Financial Corp., JPMorgan Chase & Co., and Bank of America Corp.

Draper, Utah-based Synchrony Bank N.A., a unit of Synchrony Financial, only recently became a dues-paying member of the Fort Worth Chamber of Commerce, and no other large bank is headquartered in Fort Worth, Texas, according to court filings from the CFPB.

Pittman gave the plaintiffs until Thursday afternoon to file a brief justifying keeping the case in Fort Worth, while the CFPB has the same deadline to officially request a change in venue.

To justify an early preliminary injunction, Pittman could rely on an October 2022 decision from the US Court of Appeals for the Fifth Circuit declaring the agency’s independent funding through the Federal Reserve to be unconstitutional, the Chamber and its co-plaintiffs said.

A separate rule from the CFPB requiring lenders to collect data on small business borrowers was put on hold in October while the US Supreme Court weighs the agency’s funding structure. A ruling from the high court is expected by late June.

The CFPB says the credit card late fee rule could cost banks up to $10 billion in revenue per year. President Joe Biden says the rule is part of his administration’s initiative to curb so-called junk fees.

The Chamber and its co-plaintiffs sued to block the rule on March 7, just two days after it was finished.

The case is US Chamber of Commerce v. CFPB, N.D. Tex., No. 4:24-cv-00213, Motion for Expedited Consideration of Preliminary Injunction Motion Before Court Determines Convenience-Based Venue Issues 3/19/24.