Federal judge orders Chamber to explain why late fee lawsuit was filed in Texas

Bloomberg News

In a surprise move, a Texas judge has ordered the U.S. Chamber of Commerce to explain why it filed a lawsuit against the Consumer Financial Protection Bureau in Texas, questioning the banking industry's effort at cherry-picking a venue to halt the bureau's $8 credit card late fee rule from going into effect.

On Monday, Judge Mark T. Pittman, a Trump appointee, ordered the Chamber to explain why it sued the CFPB in the Northern District of Texas, which has become the most popular among 94 district courts to challenge rules from the Biden administration. 

The CFPB alleged last week that one of the trade groups, the Fort Worth Chamber of Commerce, lacked standing in Texas and claimed that Synchrony Bank — a $106 billion-asset bank based in Stamford, Connecticut, and chartered in Utah — had only recently joined the Fort Worth chamber in order to file the case in Texas. The Chamber asked the court last week to issue a preliminary injunction to keep the CFPB's late fee rule from going into effect. 

"After a review of the record, and in particular the briefing surrounding Plaintiff's Motion for Preliminary Injunction, the Court has concerns regarding whether the Fort Worth Division of the Northern District of Texas is the correct venue to hear this lawsuit," Pittman wrote in the order. "The Court is wary that there appears to be an attenuated nexus to the Fort Worth Division, given only one plaintiff of the six in this matter has even a remote tie to the Fort Worth division."

The litigation in the case is contentious because the credit card industry collects more than $14 billion a year in late fee revenue and stands to lose $10 billion a year once the rule goes into effect in May. CFPB Director Rohit Chopra, who was also named in the lawsuit, has determined that the cost of collecting late fees by the 30 to 35 largest credit card issuers is roughly $8 a month — down from $32 for the first instance and $41 for subsequent late payments. 

Politics and policy

CFPB says bank engaged in 'forum-shopping' to fight $8 late fee rule

March 14, 2024 4:31 PM

The CFPB's $8 late fee rule issued earlier this month applies only to the largest credit card issuers with smaller banks and credit unions excluded from the final rule. 

The majority of credit card issuers are based in Delaware, South Dakota or Utah. But the trade groups that sued the CFPB are mostly based in the District of Columbia, where the CFPB is also headquartered. In addition to the U.S. Chamber and Fort Worth chamber, the four other groups that sued the CFPB are the American Bankers Association, the Consumer Bankers Association, the Longview Chamber of Commerce and the Texas Association of Business. 

The judge asked the U.S. Chamber of Commerce to explain the case's connection to the Northern District of Texas, and asked whether the filing was "for the convenience of the parties and witnesses," or if "in the interest of justice, [the court] should transfer the case to a more convenient venue."

The judge gave the CFPB the option of filing a motion to transfer the case. The CFPB has one day to notify the court of its intent to change the venue and must file with a motion and brief by March 21. The Chamber has until March 25 to respond. 

The issue of "judge shopping," or "forum shopping," has become so widespread that last week the Judicial Conference of the United States, a policymaking body for the federal courts, announced a new policy to randomly assign civil cases that have nationwide implications in courts with only one judge. The issue is particularly important for challenges to government regulations because some industry groups have sought to override executive branch policy decisions by specifically filing in Texas.

Last week, U.S. District Judge Reed O'Connor, who was first assigned the case, recused himself, citing a conflict of interest. O'Connor had previously overturned the Affordable Care Act in the Obama administration. 

Meanwhile, Pittman has ruled against the Biden administration in several major cases, most recently in finding this month that a federal agency serving minority businesses could not discriminate against white business owners. He also struck down President Biden's student loan forgiveness program in 2022. The $8 credit card late fee rule, which eliminated annual inflation adjustments, is expected to take effect May 14.