In a significant development in the ongoing litigation over the Consumer Financial Protection Bureau’s (CFPB or Bureau) Final Rule on credit card late fees, the U.S. District Court for the Northern District of Texas denied the CFPB’s motions to dismiss the Fort Worth Chamber of Commerce, transfer the case to the District of Columbia, and dissolve the preliminary injunction. This ruling follows the court’s earlier request for further briefing on the issue of associational standing, as discussed in our prior blog post, here.
The case centers on the CFPB’s Final Rule issued on March 5, 2024, which amended 12 C.F.R. § 1026.52(b) to reduce the safe harbor for late fees from $30 for the first missed payment and $41 for subsequent late payments (within six billing cycles) to $8 and prohibit adjustments for inflation. The plaintiffs, including the Fort Worth Chamber of Commerce, challenged this rule under the Administrative Procedure Act, arguing that it exceeded the CFPB’s statutory authority under the Credit Card Accountability and Disclosure Act (CARD Act).
Motion to Dismiss and Transfer
The CFPB argued that the Fort Worth Chamber lacked standing and that the case should be transferred to the District of Columbia. The court, however, found that the Fort Worth Chamber had associational standing, meeting the “undemanding” germaneness requirement as established by the Fifth Circuit. The court noted: “The Fort Worth Chamber’s mission to promote a ‘thriving business climate’ in Fort Worth will be affected if card issuers belonging to its organization are subjected to the Final Rule’s changes.”
The court also emphasized that venue was proper in the Northern District of Texas, as the Fort Worth Chamber resides there and no real property is involved in the action.
Motion to Dissolve Preliminary Injunction
The CFPB sought to dissolve the preliminary injunction following the U.S. Supreme Court’s decision in CFPB v. Community Financial Services Association of America, Ltd., which reversed the Fifth Circuit’s ruling on the CFPB’s funding structure. However, the court found that the plaintiffs still demonstrated a strong likelihood of success on the merits, stating: “Given the [c]ourt’s finding that the Final Rule violates the statutory authority granted to the CFPB under the CARD Act, the [p]laintiffs maintain a strong likelihood of success on the merits, and this factor weighs against dissolution of the [c]ourt’s preliminary injunction.”
The court highlighted that the CARD Act allows for “penalty fees” that are “reasonable and proportional” to the violation, and the CFPB’s Final Rule, which focused on covering costs rather than imposing penalties, was inconsistent with this statutory mandate. The court explained: “Fees to cover ‘costs’ and fees that constitute ‘penalties’ are not the same thing. Unlike a compensatory charge, a ‘penalty fee’ implies a purpose of deterrence.”
The court further noted that the CARD Act explicitly includes deterrence as a factor in assessing penalty fees, reinforcing that the CFPB’s cost-based approach was not aligned with the statutory text.
We will continue to monitor this case closely and provide updates as they become available.
