On August 22, 2024, the CFPB filed its reply brief in support of its motion to dissolve the preliminary injunction and lift the stay of the CFPB’s credit card late fee final rule (“Rule”) in the lawsuit challenging the Rule.

On May 10, 2024, in issuing the preliminary injunction, Judge Pittman found that the plaintiffs had established a likelihood of success on the merits based solely on the Fifth Circuit’s decision in CFSA v. CFPB, holding that the CFPB’s funding mechanism established by Dodd-Frank is unconstitutional. Judge Pittman did not rule on the plaintiffs’ other arguments that the Rule violates the TILA, the CARD Act, and the Administrative Procedure Act (APA), but commented that the plaintiffs’ other arguments were “compelling.”

On July 18, 2024, the CFPB filed its motion to dissolve the preliminary injunction, arguing that the Supreme Court’s reversal of the Fifth Circuit’s holding in CFSA v. CFPB “fatally undermines the justification for the May 10, 2024, preliminary injunction” and that the plaintiffs have not established the likelihood of success on the merits on any other claim. The CFPB previously addressed the plaintiffs’ claims that the Rule violates the CARD Act and TILA but not the APA claim. On August 8, 2024, the plaintiffs filed their brief in opposition to the CFPB’s motion to dissolve the preliminary injunction. The plaintiffs argued that the CFPB’s sole focus on issuer costs prevents credit card issuers from collecting penalty fees that are “reasonable and proportional to [the] omission or violation” of the cardholder agreement, as authorized under the CARD Act. The plaintiffs also argued that the CFPB violated TILA because rules requiring different disclosures to consumers “shall have an effective date of that October 1 which follows by at least six months the date of promulgation.”

In its reply brief, the CFPB urges the court to dissolve the preliminary injunction and lift the stay, arguing that plaintiffs have misread and distorted statutory text. The CFPB argues that Congress left if for the CFPB “to decide how to ensure that fees did not exceed this ‘reasonable and proportional’ requirement, guided by the statutory factors.” The CFPB argues that it considered all the factors when it determined that $8 was enough of a late fee to deter consumer conduct. The CFPB also justifies its exclusion of collection costs on the grounds that those costs are too far removed from the failure to make payment by the statement due date and result from the persistent nonpayment on the account. Lastly, the CFPB again argues that the TILA lead time does not apply here since the CFPB is not requiring different disclosures; the Rule just changes the amount to be disclosed under existing disclosure requirements.

Judge Pittman will need to determine whether plaintiffs have a likelihood of ultimate success on their CARD Act or TILA claims to maintain the preliminary injunction. It seems unlikely that Judge Pittman will revisit the other three factors that a court must consider before granting a preliminary injunction since he already found in his May ruling that they favored an injunction (substantial threat of irreparable harm absent the injunction, the balance of equities and hardships favors the plaintiffs, and granting the injunction would be in the public interest). We note that with the overruling of the Chevron Deference Doctrine, Judge Pittman will not be required to defer to the CFPB’s interpretations of the CARD Act and TILA.

With respect to plaintiffs request to stay implementation of the Rule for 90 days if the stay is lifted, the CFPB argues that neither the law nor the facts justify a stay for 30 days longer than the Rule originally provided. The CFPB asserts that the plaintiffs should only have a mere four days to comply if the injunction is lifted, since that was the number of days between the preliminary injunction and the compliance date.

Yesterday, Judge Pittman heared the CFPB’s motion to dismiss Plaintiff Fort Worth Chamber of Commerce for lack of standing and possibly transfer the case to the Federal District Court for D.D.C. We expect Judge Pittman will rule on that motion prior to the motion to dissolve the preliminary injunction.

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