News Release: Stay of CFPB Late Fees Rule Denies Consumers Needed Protection


May 10, 2024

Carter Dougherty,

Stay of CFPB Late Fees Rule Denies Consumers Needed Protection
Also underscores lawlessness in right-wing Fifth Circuit

The decision by a federal judge in the Fifth Circuit to stay a rule capping credit card late fees is a blow not only to consumers but to the rule of law as right-wing jurists resort to increasingly extreme measures to block sensible regulation.

“The Fifth Circuit now shows few signs of being, as we should expect from the judiciary, an objective adjudicator of the law,” said Amanda Jackson, consumer campaign director at Americans for Financial Reform. “Instead, we’re grappling with judges that appear determined to, at the behest of Wall Street and predatory lenders, thwart any pro-consumer measures they can.”

The Consumer Financial Protection Bureau on March 5 finalized a regulation that caps credit card late fees at $8 in most cases, down from a typical $32. The rule is expected to save consumers about $10 billion each year, an average savings of $220 per year for the more than 45 million people who are charged late fees. The rule only applies to the largest credit card issuers, and was to have taken effect May 14.

A group of industry lobby groups immediately sued seeking a stay of the regulation. But a district judge in the Fifth Circuit sent the case to the DC Circuit on the grounds that the groups only had a tenuous connection to the Fifth Circuit, which includes Texas, Louisiana, and Mississippi. The full Fifth Circuit Court of Appeals then ordered the judge to recall the case from the DC circuit and rule on the stay.

The decision also comes in the wake of research, spearheaded by Accountable.US, that revealed serious conflicts of interest in the case of the first judge who heard the case. After that judge’s recusal, further conflicts appeared when it was revealed that a judge on the Fifth Circuit Court of Appeals owns a significant amount of stock in Citigroup, the country’s second-largest credit card issuer.

The actions of the Fifth Circuit have drawn attention to the practice of judge-shopping, in which industry interests file lawsuits in specific judicial districts, even though the case has little to do with that geographic area. After the Fifth Circuit ignored a new policy from the Judicial Conference of the United States, the body governing procedure in American courts, Senate Majority Leader Chuck Schumer introduced legislation to curtail the practice.

“Plaintiffs should not be able to handpick judges,” said Kimberly Fountain, consumer financial justice field manager at Americans for Financial Reform. “The judicial system is supposed to be fair, not a system where industry chooses its verdict.”