Judge’s Potential Recusal Over Citi Stock Divides CFPB, Industry

Parties in a lawsuit challenging the Consumer Financial Protection Bureau’s credit card late fee rule are divided on whether a federal appeals judge hearing the case might stand to financially benefit from the court fight.

Attorneys with the CFPB on Thursday told the US Court of Appeals for the Fifth Circuit that the outcome of the litigation “could substantially affect” stock owned in any of the large card issuers affected by the case. Groups challenging the rule, led by the US Chamber of Commerce, downplayed the impact the litigation would have on those issuers and said that recusal in such cases would lead to “an unworkable system.”

Fifth Circuit Judge Don Willett, one of the judges presiding over the case, has disclosed owning stock in Citigroup Inc., which he said amounts to roughly $2,000 in his child’s education savings account. But he said he had received advice that he didn’t need to recuse himself from the case, before the CFPB flagged that large credit card companies could be financially affected by the matter.

Federal law states that US judges should recuse themselves from cases in which they, their spouses, or minor children have a financial interest in one of the parties or in the outcome of the legal proceedings.

Willett last week authored the majority opinion in a 2-1 decision rejecting a Texas trial judge’s ruling that the case should be transferred out of his court to one in Washington, D.C.

In Thursday’s letter, attorneys from the CFPB said that, in addition to the financial impact of the case, the “appearance of partiality created by an ownership stake in a large card issuer could also trigger a judge’s recusal obligation.” The CFPB’s final rule, which is set to cap credit late fees at $8, could reduce covered companies’ annual revenue by about $10 billion, the lawyers said.

In their letter, the rule’s opponents said the CFPB’s own filings in the case cut against the agency’s argument that there would be an “easily ascertainable substantial effect on any, much less all, of their stock prices.”

“It is difficult at best to understand how, in light of these agency representations, the CFPB could claim that it can be ‘easily ascertained’ that there will be a substantial effect on the stock price—rather than revenue—of any particular credit card issuer,” the lawyers wrote.

Willett is now teed up to determine whether he should be disqualified from hearing the case moving forward.

Paul Hastings LLP represents the US Chamber and its co-plaintiffs.

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