Saturday, July 20, 2024

The lawsuit over the US credit card late fee rule must proceed in Texas, the court rules

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U.S. The Consumer Financial Protection Bureau suffered a jurisdictional setback Tuesday when a federal appeals court ruled that the case should stay in Texas and not be sent to a judge in Washington in a case challenging a new rule capping credit card late fees at $8.

The ruling by a three-judge panel of the U.S. Court of Appeals for the Fifth Circuit is a victory for businesses and banking groups challenging a key part of the administration’s crackdown on “junk commissions.”

The rule prevents card issuers with more than a million open accounts from charging late fees of more than $8 unless they can prove they need more fees to cover their costs.

The CFPB fought for months to move the case from federal court in Fort Worth, which has become a favorite venue for prosecutors challenging the Democratic agenda, and where two active judges are Republican appointees.

One of those judges, U.S. District Judge Mark Pittman, appointed by former President Donald Trump, blocked 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 did so only after the 5th Circuit struck down his earlier attempt to transfer the case to a judge in Washington, where the two trade associations and the agency are based. Critics accused the groups of “judge shopping”.

Pittman ordered a second transfer of the case on May 28, saying it mostly involves plaintiffs from other states challenging actions by government officials in Washington. The only connection to Fort Worth is a local advocate, the Fort Worth Chamber of Commerce.

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But an appeals court on Tuesday ordered Pittman to reverse that decision, saying Pittman abused 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 the Chamber of Commerce did not respond to requests for comment.

In Tuesday’s ruling, U.S. Circuit Judge Dan Willett, a Trump appointee, wrote that challenging an agency rule that affects credit card issuers and customers nationwide is not just a case of interest to Washington residents.

“Thus, this case is not one in which the citizens of Fort Worth are less concerned with the controversy than the citizens of Washington,” he wrote.

Other members of the panel include U.S. Circuit Judges Kyle Duncan and Katharina Haynes, who, like Willett, were appointed by Republican presidents.

According to the CFPB, credit card issuers will collect more than $14 billion in late fees by 2022, with an average fee of $32.

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