NEW ORLEANS (Legal Newsline) - Though he has twice sent the case out of his court, a Texas federal judge looks now to be in charge of a legal challenge to new federal rules that limit late fees on credit card payments.
Fort Worth judge Mark Pittman, in just two months, twice transferred the lawsuit of the U.S. Chamber of Commerce and others to federal court in D.C. The first time, the U.S. Court of Appeals for the Fifth Circuit reversed and brought it back to him.
The second time produced the same outcome, with the Fifth Circuit finding on June 18 that the case belongs in Texas. Residents of D.C. have no special local interest in the case, a three-judge panel wrote, and court congestion in Texas does not warrant a transfer.
"If the Chamber prevails, the Final Rule will be blocked from going into effect; indeed, the preliminary injunction that is in place already has a 'nationwide effect' while the litigation proceeds," wrote Judge Don Willett, who previously served on the Texas Supreme Court before appointment in 2018 by President Trump.
"Accordingly, the local interest of citizens is the same in 'virtually any judicial district or division in the United States' - all citizens will experience the effect of this litigation on their potential credit card late fees."
Judge Pittman granted a preliminary injunction against the Consumer Financial Protection Bureau's proposed rule, which caps late fees at $8. Critics say it will actually harm consumers currently subjected to a $32 cap.
Important to the case so far was the U.S. Supreme Court issuing a ruling in a separate but related lawsuit that challenged the construction of the CFPB, which is funded by the Federal Reserve and not with taxpayer funds appropriated by Congress.
SCOTUS said that's OK, after the Fifth Circuit had said it wasn't. It was the reason Pittman granted the plaintiffs' injunction against the late fees rule.
So he again took up the issue of venue and granted the CFPB's request to send the case to D.C. federal court on May 28. The CFPB argued the Fort Worth Chamber of Commerce and its members couldn't use the court in that city to issue a nationwide injunction.
"An easy way for Plaintiffs to guarantee proper venue is to bring cases in jurisdictions where the impact is uniquely and particularly felt, and where a substantial part of the events occurred," Pittman wrote.
"Here, there is no unique or particular impact felt in the Northern District of Texas and little if any of the events surrounding the Final Rule have occurred here.
"In fact, as far as this court can discern, not one of the member banks or credit card companies directly affected by the final rule is located in the Fort Worth division."
Other plaintiffs are the Fort Worth Chamber of Commerce, the Longview Chamber of Commerce, the American Bankers Association, the Consumer Bankers Association, and the Texas Association of Business.
They sued in March, saying the move upends more than a decade of regulations and is unlawful. They also note it implements a promise made by President Joe Biden during his State of the Union address before the public-comment period on the rule had even begun.
Rulemaking has become a hot topic with the CFPB, as a House committee recently held a hearing to discuss late fees from banks and so-called junk fees.
The credit card late fees fall under the latter, the suit says.
"The concept of attaching consequences to the failure to pay an obligation is ubiquitous in our legal system," the suit says.
"Credit card obligations are no different: Congress has recognized that credit card late fees appropriately serve three commonsense, important purposes: deterring late payments, accounting for cardholder conduct, and compensating credit card issuers for the costs they incur when payments are late."
House Republicans in the Financial Services Committee have voted to repeal the late fees rule, with chair Andy Barr, a Kentucky Republican, calling the agency "rogue."
Other Biden Administration rules are also headed to court, including the Federal Trade Commission's move to ban noncompete employment contracts.