Nate Raymond
(Reuters) – The U.S. Consumer Financial Protection Bureau suffered a jurisdictional setback on Tuesday in a case challenging a new rule capping late credit card fees at $8, with a federal appeals court ruling that the case should stay in Texas and not be sent to a Washington, DC, judge.
The ruling by a three-judge panel of the New Orleans-based 5th U.S. Circuit Court of Appeals was a victory for business and banking groups challenging key parts of President Joe Biden’s administration’s crackdown on “junk fees.”
At issue are rules that prohibit card issuers with more than 1 million open accounts from charging late fees of more than $8 unless they can prove the higher fees are necessary to cover their costs.
The CFPB has been fighting for months to move the case out of federal court in Fort Worth, which has become a favorite venue for litigants challenging the policies of the Democratic president and where two of the court’s 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 urging of groups including the U.S. Chamber of Commerce and the American Bankers Association.
But Pittman did so after her earlier attempt to transfer the case to a judge in Washington, where both industry groups and the agency are based, was blocked by the 5th Circuit Court of Appeals.
Judge Pittman has previously stressed that her court has too many cases to handle, but critics have accused the groups of “judge shopping.”
Judge Pittman ordered the case transferred for a second time on May 28, saying the case primarily involves out-of-state plaintiffs challenging the actions of government officials in Washington. The only connection to Fort Worth was a local plaintiff, the Fort Worth Chamber of Commerce.
But on Tuesday, the appeals court ordered Judge Pittman to vacate that decision, saying he 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 did not respond to a request for comment.
According to the CFPB, credit card issuers collected more than $14 billion in late fees in 2022, with the average fee being $32.
U.S. Circuit Judge Don Willett, a Trump appointee, wrote in his ruling Tuesday that a challenge to the agency’s rules, which would affect credit card issuers and customers across the country, is not the type of case that would only concern Washington state residents.
“Accordingly, this lawsuit does not suggest that the citizens of Fort Worth have any less of an interest in the litigation than the citizens of Washington, D.C.,” he wrote.
His opinion was joined by Circuit Judges Kyle Duncan and Katherina Haynes, who were both appointees by Republican presidents.
“The Court correctly recognized that this case should continue in Texas, where the CFPB’s micromanagement of businesses is causing real harm,” Maria Monahan, general counsel for the U.S. Chamber of Commerce Litigation Center, said in a statement.
(Reporting by Nate Raymond in Boston; Editing by Josie Kao and Edwina Gibbs)
