On July 18, 2024, in the lawsuit challenging the CFPB’s credit card late fee rule (Rule), the CFPB refiled its notice of supplemental authority in support of its motion to dismiss or transfer the case, motion to dissolve the preliminary injunction, and brief in support its motion. The filings were previously stricken due to the district court’s lack of jurisdiction.

On July 11, 2024, the CFPB filed in the Fifth Circuit its unopposed Motion for the Immediate Issuance of the Mandate and stated therein that it does not intend to seek a rehearing before the same panel or en banc and requested the Fifth Circuit to issue its mandate forthwith to allow the District Court to entertain further proceedings in the case. On July 15, 2024, the Fifth Circuit granted the CFPB’s motion and issued its mandate.

The District Court will soon consider these arguments from the CFPB to transfer venue and to dissolve the preliminary injunction based on the Supreme Court’s reversal of the Fifth Circuit opinion in the CFSA case.

Motion to Dissolve Preliminary Injunction

The CFPB’s motion is predicated upon the Supreme Court reversing the Fifth Circuit’s holding in CFSA v. CFPB, which held that the CFPB’s funding mechanism was unconstitutional. In issuing the preliminary injunction, Judge Pittman found that that the plaintiffs had established a likelihood of success on the merits based solely on the Fifth Circuit’s decision in CFSA. In issuing the preliminary injunction, Judge Pittman found it unnecessary to address the plaintiffs’ other arguments that the Rule violates the Truth in Lending Act (TILA), the CARD Act, and the Administrative Procedure Act (APA). However, Judge Pittman did comment that the plaintiffs’ other arguments were “compelling.” If the CFPB’s renewed effort to transfer the case continues to be unsuccessful, and Judge Pittman Ruled on the motion to dissolve, then it seems highly likely that Judge Pittman will continue the preliminary injunction and that he will eventually grant summary judgment in favor of the plaintiffs and against the CFPB on one or more of the alternative grounds, particularly now that, with the overruling of the Chevron Doctrine, he will not be required to defer to the CFPB’s interpretations of the CARD Act and TILA.

As a refresher, to obtain a preliminary injunction, the plaintiffs had to show: (1) a substantial threat of irreparable harm absent the injunction, (2) a likelihood ultimate success on the merits, (3) the balance of equities and hardships is in their favor, and (4) granting the injunction would be in the public interest.

In its brief in support of the motion to dissolve the preliminary injunction, the CFPB argued that the Supreme Court’s ruling “fatally undermines the justification for the May 10, 2024, preliminary injunction” and the plaintiffs have not established the likelihood of success on the merits on any other claim. The CFPB addressed the plaintiffs’ claims that the Rule violates the CARD Act and TILA but failed to address the plaintiffs’ APA claim:

• CARD Act: The CFPB stated it did not exceed its statutory authority and it appropriately “consider[ed]” certain costs, deterrence, consumer conduct, and other necessary or appropriate factors it “deem[s] necessary or appropriate” when it defined a “reasonable and proportional” late fee. The use of the term “penalty fee” does not require late fees to be greater than an issuer’s related costs. A late fee can be a deterrent if it only compensates the issuer for its costs because the consumer may face additional consequences like loss of grace periods, penalty interest rates, and credit reporting.
• TILA: The CFPB argued that the effective date does not violate TILA because the rule does not require any different disclosure as issuers must still disclose late fees at account opening and on periodic statements. If an issuer has to change the amount of the disclosed late fee, that is not a new required disclosure. A TILA violation alone will not entitle plaintiffs to a preliminary injunction, as that provision could be severed from the Rule.

The CFPB stated “the Court should reconsider its determination that the balance of the equities and public interest support a preliminary injunction.” They argued that maintaining the status quo is a disservice to the public interest in paying lower late fees. The CFPB stated “after all, new laws and regulations are put in place because the people’s elected representatives—or the agencies tasked with carrying out the mandates of those representatives—have determined that they are appropriate and in the public interest.”

The plaintiffs will obviously oppose both motions and urge Judge Pittman to continue the preliminary injunction based on the TILA, CARD Act, and APA claims raised in their complaint and preliminary injunction motion.

[View source.]