Texas Federal Court Sets April 2 Hearing on Lawsuit Challenging CFPB on Credit Card Late Fee Ruling; CFPB Moves to Transfer Case to DC Federal Court

03/27/24

The Texas federal district court hearing the lawsuit challenging the CFPB’s final credit card late fee rule  issued an order this week setting April 2 as the date for a hearing on the plaintiffs’ motion for a preliminary injunction.  

This week, the plaintiffs filed a notice that they are appealing to the Fifth Circuit the Texas federal district court’s “effective denial” of their motion for a preliminary injunction.  At the end of last week, the CFPB filed a motion with the district court to transfer the case to the U.S. District Court for the District of Columbia.  Even though the hearing is set  on the preliminary injunction motion, that does not mean  that the court has decided to deny the CFPB’s transfer motion.  Finally, despite setting a hearing date for the preliminary injunction motion, the court also entered an order today referring the case for mediation, appointing Judge David L. Evans as mediator, and directing the parties to mediate with Judge Evans on April 19, 2024.  This is likely irrelevant since this is not a matter that can be resolved through mediation.

Notice of Appeal.  On March 20, the district court denied the plaintiffs’ motion for expedited consideration of their preliminary injunction motion.  While the denial of that motion is not an appealable order, the plaintiffs argue in their notice of appeal that, in denying the motion, the district court has effectively denied their request for meaningful preliminary injunctive relief and, under Fifth Circuit precedent, action by a district court that has the practical effect of denying injunctive relief necessary to remediate a threat of serious or irreparable harm is immediately appealable.  According to the plaintiffs, because the Rule has a May 14, 2024 effective date, their members must act immediately to meet their obligations under the Rule and must notify current cardholders of any changes they make to the terms of their cardholder agreements to mitigate the late fee change at least 45 days before such changes become effective.  To time those changes with the Rule’s effective date, customers would have to receive such notices by March 29.  In the absence of any action by the district court on their preliminary injunction motion, the plaintiffs’ assert that immediate appellate review is needed to avoid the “ongoing, and accumulating, irreparable harm” faced by the plaintiffs.  It is possible that the Fifth Circuit will request special briefing on whether it has jurisdiction to hear an appeal at this juncture.

Motion to transfer venue.  In support of its motion to transfer venue, the CFPB argues even if the Northern District of Texas or the Fort Worth Division were a proper venue, a transfer to the D.C. federal district court would be appropriate under 28 U.S.C. Sec. 1404.  (In its opposition to the plaintiffs’ preliminary injunction, the CFPB argued that the venue was not proper in the Northern District because, even though one of the plaintiffs is a resident of the Northern District, it cannot satisfy the test for associational standing and thus cannot serve as the basis for venue in the Northern District.)    As an initial matter, the CFPB argues that venue in the D.C. federal district court is proper because the central event giving rise to the plaintiffs’ claim (i.e. the issuance of the Rule) occurred in D.C. and three of the plaintiff associations “call D.C. home.”  

In their reply to the CFPB’s transfer motion, the plaintiffs argue that neither the private- nor public-interest factors favor transfer to the D.C. federal district court.  According to the plaintiffs, the only public-interest factor that might support transfer is court congestion.  However, they assert that under Fifth Circuit precedent, a transfer under Section 1404 cannot be granted solely because of court congestion.  The plaintiffs argue that at best, the private-interest factors are neutral as are the public-interest factors other than court congestion. 

Because the CFPB has not shown that the transferee venue is clearly more convenient than their chosen venue, the plaintiffs contend that their choice of venue is entitled to deference.  The plaintiffs also argue that their connections to the Fort Worth Division weigh in favor of giving deference to their choice of venue.  They point to specific member banks whose total loan receivables include a high percentage of  receivables from Texas and who have a large number of cardholders residing in the Fort Worth region.