Texas Judge Issues Injunction on CFPB’s Credit Card Late Fee Rule

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In March 2024, the Consumer Financial Protection Bureau issued a new ruling on credit card late fees, in which credit unions with over one million open accounts are prevented from charging more than $8 in late fees. This move was part of the Biden Administration’s long-term plan to push back on supposed “junk fees” such as overdraft fees and was set to go into effect in May.

However, Federal Judge Mark Pittman of Texas has now issued an injunction on that ruling.

Since the announcement, pushback against the ruling has been fierce and vocal, with trade groups such as America’s Credit Unions speaking out against it. In fact, the CFPB received nearly 60,000 letters urging them to reconsider. But still, the organization pushed on, resulting in trade groups—namely, the American Bankers Association, the Consumer Bankers Association, the U.S. Chamber of Commerce, and Texas business groups—challenging the rule and filing a suit requesting an injunction.

While the suit was filed in Texas, Federal Judge Mark Pittman and the Biden Administration both tried to have it sent back to D.C., arguing that the suit did not relate to Texas and that it had merely been filed there as the Texas courts were known to be more strict with the CFPB and have previously ruled against it, including its funding mechanism.

Despite Judge Pittman’s rejecting to have the case ruled in Texas, the Fifth Circuit Court of Appeals determined it should remain in Texas regardless, resulting in Judge Pittman’s decision to issue the injunction.

However, Judge Pittman did state that the decision to issue the injunction was less of an opinion on the late fee ruling itself and more of a continuation of the ruling that the CFPB’s structure and funding are unconstitutional, therefore, anything ruling issued by the agency is unconstitutional as well.

“Importantly, the Court offers no opinion and has no opinion as to whether the CFPB’s final rule reducing the credit card late fee cap is good or bad policy, as that is irrelevant to the Court’s analysis,” Pittman wrote.

He added that if the rule had gone into effect on Tuesday when it was meant to, financial institutions would have “face[d] an enormous undertaking based on a potentially unconstitutional rule,” and so he felt compelled to issue the injunction.

Representatives for financial institutions praised the move, while more progressive groups accused them of “venue shopping” and choosing to have the case heard in a court they knew would side with them, rather than having it heard by a “fair a neutral judge.” And it seems despite his forced decision-making, Pittman agreed with the sentiment as well.

The Supreme Court is expected to rule on the question of CFPB’s funding mechanism being unconstitutional or not as early as next month. If it is found unconstitutional, it is likely that the organization will face a great number of hurdles and that the late fee ruling may disappear entirely. If it is found constitutional, it may be pushed into effect.

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