LATE FEE LITIGATION
U.S. Chamber of Commerce v. Consumer Financial Protection Bureau
Date: May 28, 2024
Issue: Whether the Consumer Financial Protection Bureau’s (CFPB) late fee final rule exceeds its statutory authority under the Credit Card Accountability Responsibility and Disclosure Act (CARD) Act and violates the Administrative Procedure Act (APA) and Truth in Lending Act (TILA).
Case Summary: A Fifth Circuit panel (Judges Catharina Haynes, Don Willett, and Stuart Duncan) issued an order staying Judge Mark Pittman’s transfer order until Tuesday, June 18, 2024, at 4:00 p.m. EDT.
As background, under the CARD Act, issuers may charge a “penalty fee” for violating a cardholder agreement, if the fee is “reasonable and proportional to such omission or violation.” In assessing whether a penalty fee is “reasonable and proportional,” the CFPB must consider issuer costs, cardholder deterrence, and cardholder conduct. In the final rule, the CFPB reduced the late fee safe harbor to $8.
In its complaint, the American Bankers Association argued the final rule violates: the U.S. Constitution’s Appropriations Clause, the CARD Act, the Dodd-Frank Act, and the Truth in Lending Act’s effective-date provision. ABA also argued the final rule is arbitrary and capricious under the APA. ABA moved the court for a preliminary injunction.
On May 10, 2024, Judge Pittman granted a preliminary injunction determining ABA showed a substantial likelihood of success on the merits of its constitutional claim tied to the CFPB’s funding. In Community Financial, the Fifth Circuit ruled the CFPB’s funding structure was unconstitutional because Congress’ decision to cede its appropriations power to the bureau violates the U.S. Constitution’s structural separation of powers. Applying Community Financial, Judge Pittman concluded the late fee rule is likely unconstitutional. Next, Judge Pittman determined the final rule imposed a substantial threat of irreparable harm to ABA’s members, and granting an injunction would serve the public interest.
On May 28, 2024, the CFPB filed a renewed motion to transfer the case to Washington, D.C. The CFPB argued court congestion, local interests, and familiarity with governing law favored a transfer. On the same day, Judge Pittman granted CFPB’s motion, transferring the case to Washington, D.C. Judge Pittman reasoned the practical factors making a trial more expeditious and inexpensive favored a transfer. He also concluded four public-interest factors favored a stay: the administrative difficulties flowing from court congestion; the local interest in having localized interests decided at home; the familiarity of the forum with the law governing the case; and the avoidance of unnecessary problems of conflict of laws or in the application of foreign law.
In response, ABA filed an emergency petition for a writ of mandamus and administrative stay, asking the Fifth Circuit to order the Fort Worth district court to reopen the case. ABA argued the district court abused its discretion in concluding court congestion favored a transfer to the District of Columbia. ABA cited the Fifth Circuit’s decision in In re Clarke, which ruled court congestion alone is not a sufficient basis for transfer, because it undermines “weight” due to a plaintiff’s choice and ignores the plaintiffs’ role as master of the complaint. ABA also claimed the district court erred in concluding local interests favored the transfer, as non-party citizens in the Northern District of Texas have a strong interest in the case’s outcome.
ABA also claimed the district court abused its discretion in concluding one of the private factors — practicalities of litigation — favored the transfer. According to Judge Pittman, the number of attorneys in the case traveling to Fort Worth at their client’s or the government’s expense justified the transfer. But ABA stressed the location of counsel should not factor into the “practicalities of litigation” analysis or outweigh ABA’s selection of venue. In light of the public and private interest factors errors, ABA stressed the CFPB did not establish good cause for the transfer.
On May 29, 2024, the Fifth Circuit stayed the transfer order until 4:00 p.m. EDT on June 18. The Fifth Circuit also ordered the CFPB to respond to ABA’s mandamus petition by June 6.
Bottom Line: The preliminary injunction remains in place despite the transfer order.
