Federal Appeals Court Rules Texas Judge Erred in Transferring Credit Card Late Fee Suit

A federal appeals court ruled on Friday that a Texas judge erred in transferring an industry-backed lawsuit challenging a federal agency rule on credit card late fees to another court in Washington, D.C.

The 5th U.S. Circuit of Appeals, based in New Orleans, voted 2-1 in favor of business and banking groups who filed the lawsuit in Fort Worth, Texas. This ruling marks a significant jurisdictional victory for entities such as the U.S. Chamber of Commerce and American Bankers Association. The lawsuit, filed last month, targeted a rule issued by the Consumer Financial Protection Bureau (CFPB) regarding credit card late fees.

Fort Worth, with its federal courthouse, has increasingly become a preferred venue for litigants challenging policies implemented by President Joe Biden’s administration. The controversy surrounding this case underscores broader concerns about litigants strategically selecting sympathetic courts or judges.

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The CFPB rule under scrutiny aims to address what the agency terms “excessive” fees levied by credit card issuers for late payments, which the agency estimates to cost consumers a staggering $12 billion annually. According to the rule, credit card issuers with over 1 million open accounts are restricted to charging a maximum of $8 for late fees, unless they can substantiate the need for higher fees to cover their costs. Previously, these issuers could impose late fees ranging up to $30 or $41 for subsequent late payments.

Source: Reuters