Lawsuit over U.S. credit card late fee rules must stay in Texas, court rules


Nate Raymond

(Reuters) – The U.S. Consumer Financial Protection Bureau suffered a judicial setback on Tuesday in a lawsuit challenging its new $8 cap on credit card late fees, with a federal appeals court saying the case should stay in Texas, Rather than being sent to a judge in Texas.

The ruling by a three-judge panel of the New Orleans-based 5th U.S. Circuit Court of Appeals is a victory for business and banking groups challenging a key part of President Joe Biden's administration's crackdown on “junk fees.”

At issue is a rule that would prevent card issuers with more than 1 million accounts from charging more than $8 in late fees unless they can prove a higher fee is needed to cover their costs.

The CFPB has been fighting for months to move the case out of the Fort Worth federal courthouse, which has become a favorite venue for litigants challenging the Democratic agenda and whose two current judges are Republican appointees.

One of the judges, U.S. District Judge Mark Pittman, an appointee of former President Donald Trump, halted enforcement of the rule in May at the request of groups including the U.S. Chamber of Commerce and the American Bankers Association.

But he previously tried to move the case to a judge in Washington, where both trade associations and the agency are based, but was blocked by the Fifth Circuit. Critics accuse these groups of “blind shopping.”

Pittman ordered a second transfer of the case on May 28, saying it primarily involved out-of-state plaintiffs challenging the actions of government officials in Washington. The only connection to Fort Worth is the local plaintiff, the Fort Worth Chamber of Commerce.

But an appeals court on Tuesday ordered Pittman to reverse that decision, saying Pittman misapplied the legal standard for transferring cases and that his decision to send the case to Washington was a “clear abuse of discretion.”

The CFPB and Chamber of Commerce did not respond to requests for comment.

In Tuesday's ruling, U.S. Circuit Judge Don Willett, a Trump appointee, wrote that a challenge to an agency's rules affecting credit card issuers and customers nationwide is not the type of case of interest only to Washington residents.

“Thus, in this case, the citizens of Fort Worth have no less interest in the lawsuit than the citizens of Washington, D.C.,” he wrote.

The other members of the panel, U.S. Circuit Judges Kyle Duncan and Catharina Haynes, were appointed by Republican presidents like Willett.

According to the CFPB, card issuers will charge more than $14 billion in credit card late fees in 2022, with the average fee being $32.

(Reporting by Nate Raymond in Boston; Editing by Josie Kao)



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