Fifth Circuit Extends Hold on Credit Card Late Fee Suit Transfer

A lawsuit brought by banking industry groups challenging a new cap on credit card late fees will remain in limbo, as a federal appeals court extended a pause on moving the case from Forth Worth, Texas, to Washington, D.C.

The US Chamber of Commerce, the American Bankers Association, and the Consumer Bankers Association, along with a trio of Texas industry groups, are suing to block a final rule from the Consumer Financial Protection Bureau capping credit card late fees at $8. Their challenge quickly hit a roadblock last month when a Texas federal district judge decided the case didn’t belong in his court.

The US Court of Appeals for the Fifth Circuit on March 29 put a hold on transferring the case to Washington, D.C. The Fifth Circuit in its latest order extended the stay through the end of Friday.

The fight over where the credit card late fee lawsuit should be heard is part of a broader debate over industry efforts to bring regulatory challenges in business-friendly Texas federal courts.

The Judicial Council, the federal judiciary’s policy arm, issued a policy in March aimed at limiting so-called judge shopping. Judge David Godbey, the chief judge for the Northern District of Texas, said in an April 1 letter to Senate Majority Leader Chuck Schumer (D-N.Y.) that judge selection practices in his district would remain unchanged despite the new policy.

Venue Problems

The CFPB venue dispute came to a head last week when Judge Mark Pittman, a Trump appointee, ordered the case transferred to Washington, finding that no plaintiff bank subject to the regulation is based in the US District Court for the Northern District of Texas’s Fort Worth Division.

One bank, Synchrony Bank N.A., is a member of the Fort Worth Chamber of Commerce, but is based in Draper, Utah. Synchrony Bank is a unit of Stamford, Conn.-based Synchrony Financial.

Pittman also noted in his order that three of the plaintiffs—the US Chamber, the ABA, and the CBA—are based in Washington along with the CFPB, as are most of the attorneys taking part in the case.

“Venue is not a continental breakfast; you cannot pick and choose on a Plaintiffs’ whim where and how a lawsuit is filed,” Pittman, a Trump appointee, said.

The US District Court for the District of Columbia docketed the case on March 29, assigning it to Judge Amy Berman Jackson.

The plaintiffs initially filed an appeal with the Fifth Circuit after Pittman, who came onto the case after the first judge overseeing it recused himself, declined to issue either a preliminary or emergency injunction blocking the rule.

The CFPB’s rule, finalized March 5, is set to place an $8 limit on credit card late fees. Current regulations allow banks to charge $30 for the first missed payment and $41 for each late payment over the subsequent six months. The fees are subject to automatic inflation adjustments, which the rule also bans.

The late fee rule is part of the Biden administration’s fight against so-called junk fees. President Joe Biden highlighted it at his March 7 State of the Union address. The rule is set to take effect May 14.

The Chamber and its co-plaintiffs sued to block the final rule two days after it was issued.

Paul Hastings LLP is representing the Chamber and its co-plaintiffs.

The case is US Chamber of Commerce v. CFPB, 5th Cir., No. 24-10248, 4/2/24.