Late Fee Rule Halted by TX Court

Mopic / Adobestock

Late on Friday, May 10, 2024, a District Court in Texas entered an order stopping the Consumer Financial Protection Bureau's (CFPB) Late Fee Rule (Rule), which would slash credit card late fees to $8.00, from going into effect on May 14, 2024. The Order says the injunction is warranted because of the CFPB's funding structure and because the injuries created by the Rule, if it were to go into effect tomorrow, could not be practicably measured. 

Upon its release, the Rule was widely criticized for both the CFPB's alleged failure to follow the Administrative Procedures Act (APA) and for its significant operational impacts. The announcement of the Final Rule on credit card late fees sparked an immediate reaction. A collective of trade groups, including the U.S. Chamber of Commerce, Fort Worth Chamber of Commerce, Longview Chamber of Commerce, the American Bankers Association, the Consumer Bankers Association, and Texas Association of Business (collectively, the Trade Groups) filed a complaint in the U.S. District Court for the Northern District of Texas challenging the Rule.

The Trade Groups alleged they were entitled to a preliminary injunction because of the CFPB's funding structure, and the Rule violates the  Credit Card Accountability Responsibility and Disclosure Act (CARD Act), the Truth in Lending Act (TILA), and APA. More specifically, the Trade Groups argued that because the Fifth Circuit Court of Appeals had previously held that the CFPB's funding structure is unconstitutional, any rule passed under that same funding structure, including the Late Fee Rule, is likewise unconstitutional. 

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