Fort Worth, Texas – A federal lawsuit challenging the new limits on credit card late fees will continue to be heard in Texas. The U.S. Court of Appeals for the Fifth Circuit decided on Friday to reverse the previous ruling by federal Judge Mark Pittman, who had moved the case to Washington, D.C. Pittman had argued that the case should not be heard in Texas since the majority of the plaintiffs and attorneys involved, as well as the Consumer Financial Protection Bureau (CFPB), have ties to D.C.
The lawsuit was filed by the U.S. Chamber of Commerce, the American Bankers Association, the Consumer Bankers Association, and several Texas industry groups against the CFPB. It stems from the CFPB’s announcement of a rule change that would decrease the maximum late fees charged by credit card issuers from an average of $32 to $8. The plaintiffs argue that the CFPB is overstepping its authority, and that the rule change would harm American cardholders who pay their bills on time and benefit from a variety of credit card offerings.
In his earlier ruling, Judge Pittman stated, “Under plaintiffs’ theory, there isn’t a city in the country where venue would not lie, as every city has customers who may potentially be impacted by the rule.” The court’s decision to keep the case in Texas acknowledges the need for a fair consideration of the plaintiffs’ claims.
The CFPB defends the rule change, stating that it closes a longstanding loophole that allows credit card companies to charge excessive late fees. The bureau estimates that the new rule will put $10 billion back in consumers’ pockets. However, critics argue that the cap on late fees could have unintended consequences for banking innovation, as banks may seek to offset the revenue loss by cutting costs elsewhere.
The outcome of this lawsuit will have significant implications for credit card issuers and consumers nationwide. The case will continue in Fort Worth, Texas, where the plaintiffs will have the opportunity to present their arguments before the court.