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U.S. District Judge Mark Pittman in Fort Worth issued a
preliminary injunction preventing the rule from taking effect
next week. The injunction was sought by groups including the
U.S. Chamber of Commerce and the American Bankers Association.
Pittman, appointed by Republican then-President Donald Trump,
cited a 2022 ruling by the New Orleans-based 5th U.S. Circuit
Court of Appeals, which found the CFPB's funding structure
unconstitutional.
"Consequently, any regulations promulgated under that regime are
likely unconstitutional as well," Pittman wrote. "Thus,
Plaintiffs establish a likelihood of success on the merits."
The U.S. Supreme Court is reviewing the 2022 ruling, and during
oral arguments in October appeared wary of upholding it. Pittman
remains bound by the ruling because his court is in the 5th
Circuit's jurisdiction.
Maria Monaghan, counsel to the U.S. Chamber of Commerce
Litigation Center, in a statement called Pittman's decision "a
major win for responsible consumers who pay their credit card
bills on time and businesses that want to provide affordable
credit."
A CFPB spokesperson said the regulator will keep defending the
rule, saying "consumers will shoulder $800 million in late fees
every month that the rule is delayed - money that pads the
profit margins of the largest credit card issuers."
The rule has the backing of President Joe Biden, a Democrat.
White House spokesperson Jeremy Edwards in a statement called
the ruling disappointing, saying the CFPB's rule is "a critical
measure to save American families billions in junk fees."
The CFPB adopted the rule to counteract what it called
"excessive" fees that credit card issuers charge for late
payments.
The rule would block card issuers with more than 1 million open
accounts from charging more than $8 for late fees, unless they
could prove higher fees are necessary to cover their costs.
According to the CFPB, issuers collected more than $14 billion
worth of credit card late fees in 2022, with an average fee of
$32.
Business and banking groups sued in March to block the rule. The
case had been delayed in a jurisdictional back-and-forth over
whether the case should remain in Texas, after Pittman initially
transferred it to Washington, D.C.
A 5th Circuit panel dominated by Trump appointees ultimately
reversed that decision and last week gave Pittman a May 10
deadline on whether to issue an injunction.
Pittman in Friday's order expressed concern over the 5th
Circuit's rulings in the case and said he still believed a judge
in Washington could have him himself issued a "just and fair"
ruling. "We must trust the system," he said.
(Reporting by Nate Raymond in Boston; Editing by Leslie Adler,
David Gregorio, Gerry Doyle and William Mallard)
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