On May 10, the United States District Court for the Northern District of Texas granted the credit card industry at least a temporary reprieve from a CFPB rulemaking that would have restricted late fees on consumer credit cards significantly (as described in more detail in our prior Legal Update).
The rule, otherwise slated to become effective May 14, has been stayed after the court granted the industry groups plaintiffs motion for a preliminary injunction. In evaluating key factors relevant to the injunction, however, the court based its determination of plaintiffs' likelihood of success on the merits entirely on the Fifth Circuit's prior opinion that the CFPB's funding structure is unconstitutional. That matter is currently under consideration by the United States Supreme Court in CFPB v. CFSA, with an opinion anticipated before the Court's summer recess. Accordingly, the stay may need to be revisited in the short-run—with greater consideration of the strength of plaintiffs' rule-specific challenges based on the APA and CARD Act—if the Supreme Court rules the CFPB to be constitutionally funded.
The District Court's ruling comes as part of a process-heavy start to litigation challenging the validity of the rule. Before reaching any substantive issues, the suit has included proceedings regarding change of venue (with the District Court initially shifting the matter to DC before the Fifth Circuit reversed), calls for one of the Fifth Circuit judges to recuse himself based on personal investments in financial institutions, and criticism levied by the Fifth Circuit on the pace at which the District Court considered early motions. The limited nature of the stay issued on Friday leaves open the door for more procedural maneuvering before the core of the challenge is addressed.
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