CFPB Appeals Denial of Lawsuit Transfer Over $8 Credit Card Late Fee Rule

The Consumer Financial Protection Bureau (CFPB) has appealed the Fifth Circuit's denial of its request to transfer a lawsuit challenging the agency's $8 credit card late fee rule. The CFPB warned that the denial could lead to potential forum-shopping consequences, as the lawsuit was filed in the Fifth Circuit, which has jurisdiction over Texas, Louisiana, and Mississippi. The agency argued that the case should be transferred to a court in Washington, D.C., where the CFPB is headquartered.

The appeal is the latest development in the ongoing legal battle over the CFPB's rule, which aims to limit credit card late fees. The lawsuit was brought by the U.S. Chamber of Commerce, the American Bankers Association, and the Consumer Bankers Association, who argue that the CFPB is acting outside its authority. The case was initially moved from Washington, D.C. to Fort Worth, Texas, but the CFPB is now appealing that decision.

The CFPB had suggested that U.S. Circuit Judge Don Willett, who is hearing the case, might need to recuse himself because his son owns stock in Citigroup. However, a judicial ethics panel ruled that Willett's son's stock ownership does not constitute a financial interest that would require recusal.

Why this matters: The outcome of this lawsuit could have significant implications for consumers and the credit card industry. The CFPB's rule aims to protect consumers from excessive late fees, while the industry groups argue that the agency is overstepping its authority.

The CFPB's rule would cap credit card late fees at $8, which the agency says would lower costs for consumers. However, the effort to implement the rule has faced resistance from Republicans in Congress. The Republican-controlled House Financial Services Committee recently voted to advance a bill that would keep late fees much higher than the CFPB's proposed cap. The bill is expected to fail in the Democratic-controlled Senate.

The Biden administration has pushed to eliminate what it calls "junk fees" and increase rate transparency for consumers across various industries. However, this push has faced opposition from Republicans who are "hellbent on denying " President Biden "any victory in an election year," according to the CFPB.

The CFPB's appeal of the Fifth Circuit's denial of the transfer request highlights the ongoing legal and political battle over the agency's efforts to regulate credit card late fees. The outcome of the lawsuit could have significant consequences for both consumers and the credit card industry, as it will determine whether the CFPB has the authority to cap late fees at $8.

Key Takeaways

• CFPB appeals 5th Circuit's denial to transfer lawsuit over $8 credit card late fee rule.
• Lawsuit filed by industry groups arguing CFPB overstepped its authority with the rule.
• Judge's son's Citigroup stock ownership does not require recusal, ethics panel rules.
• CFPB's rule aims to protect consumers, but faces resistance from Republicans in Congress.
• Outcome of lawsuit could have significant consequences for consumers and credit card industry.