Late fee litigation
U.S. Chamber of Commerce v. Consumer Financial Protection Bureau
Date: April 15, 2025
Issue: ABA’s settlement with the Consumer Financial Protection Bureau (CFPB), vacating the bureau’s late fee final rule.
Case Summary: On April 15, Judge Mark Pittman of the Northern District of Texas vacated the CFPB’s Late Fee final rule, granting the joint settlement motion filed by the American Bankers Association and the bureau.
ABA sued the CFPB, alleging the late fee final rule exceeds the bureau’s authority under the CARD Act and is arbitrary and capricious under the APA. On May 10, 2024, Judge Pittman granted ABA’s motion for a preliminary injunction and stayed the late fee final rule. Judge Pittman based his decision solely on ABA’s constitutional claim tied to the Fifth Circuit’s ruling in Community Financial Services Association (CFSA) v. CFPB, which ruled the bureau was unconstitutionally funded under the Appropriations Clause. On May 16, 2024, the U.S. Supreme Court reversed the Fifth Circuit’s CFSA decision.
Afterward, the CFPB moved to dissolve the preliminary injunction and lift the stay of the late fee final rule, arguing the Supreme Court’s decision in CFSA undermines the justification for the preliminary injunction. ABA contended, however, that the late fee final rule violates the CARD Act by misconstruing its mandate that issuers charge a “penalty fee” for the violation of the “cardholder agreement” and conflicts with the CARD Act’s text on “cost.” On Dec. 6, 2024, Judge Pittman denied the CFPB’s motion, holding that ABA is likely to succeed on the merits because the Late Fee final rule “clearly violates the CARD Act.” On Feb. 20 this year ABA filed its motion for summary judgment.
On April 14, 2025, the parties filed a joint settlement with the court, agreeing that the CFPB exceeded its authority under the CARD Act by not permitting card issuers to impose penalty fees that are reasonable and proportional to violations. Accordingly, the parties agreed that the late fee final rule violates the APA, and vacatur is the appropriate remedy. The parties also agreed the dismissal would not prevent future constitutional or statutory challenges to other bureau regulations, and the CFPB further agreed not to assert issue or claim preclusion against any such future challenge. Adopting the settlement motion, Judge Pittman vacated the late fee final rule.
Bottom line: In a joint statement, the co-plaintiffs stated: “This is a win for consumers and common sense. If the CFPB’s rule had gone into effect, it would have resulted in more late payments, lower credit scores, higher interest rates and reduced credit access for those who need it most. It would have also penalized the millions of Americans who pay their credit card bills on time and reduced important incentives for consumers to manage their finances. We appreciate the CFPB’s recognition that the rule violated the law, and the bureau’s willingness to resolve our legal challenge.”
Document: Motion, Order & Final Judgment
