On May 10, a Texas federal court granted a preliminary injunction enjoining the Consumer Financial Protection Bureau (CFPB or Bureau) from implementing the credit card late fee rule, most recently discussed here. The court found the plaintiffs demonstrated a likelihood of success based on their reliance on the Fifth Circuit’s decision in CFPB v. Community Financial Services Association of America, Ltd. finding that the CFPB’s “double-insulated funding scheme is unconstitutional.” The court further found that the balance of interest test weighed in the plaintiffs’ favor because if the court denied the injunction, “[p]laintiffs face an enormous undertaking based upon a potentially unconstitutional rule,” whereas if the court granted the injunction “the CFPB is relatively unaffected because the Final Rule has not yet gone into effect.”
As a result of the injunction, the credit card late fee rule is stayed pending resolution on the merits.
As discussed here, in March 2024 the CFPB finalized its credit card late fee rule, which sets a safe harbor amount for late fees at $8 and eliminates the annual inflation adjustments to that safe harbor amount, for larger card issuers. A collective of trade groups, including the U.S. Chamber of Commerce, Fort Worth Chamber of Commerce, Longview Chamber of Commerce, the American Bankers Association, the Consumer Bankers Association, and Texas Association of Business immediately filed a complaint in the U.S. District Court for the Northern District of Texas challenging the rule. They argue that the rule is unconstitutional and violates the Administrative Procedures Act and have long sought a preliminary injunction while the case is pending.
As discussed here, the district court sua sponte initiated briefing on whether venue was proper in the Northern District of Texas and transferred the case to the District Court for the District of Columbia effectively denying the preliminary injunction. The trade groups appealed.
Because the district court denied the trade group’s preliminary injunction motion without making findings on the merits, the Fifth Circuit vacated the transfer order, vacated the district court’s effective denial of the motion for preliminary injunction, and remanded with instructions that the district court rule on the trade groups’ motion for a preliminary injunction by May 10.
