Order Denying Motion to Dissolve Preliminary Injunction and Motion to Transfer Case

OPINION & ORDER

Before the Court are two Motions advanced by Defendants Consumer Financial Protection Bureau and Rohit Chopra (“CFPB”): (1) a Motion to Dismiss the Fort Worth Chamber of Commerce (“Fort Worth Chamber”) for Lack of Standing and Transfer this Case to the U.S. District Court for the District of Columbia (ECF No. 109); and (2) a Motion to Dissolve the Preliminary Injunction and Lift the Stay of the Late Fee Rule (ECF No. 105). For the reasons below, the Court DENIES both Motions.

BACKGROUND & PROCEDURAL HISTORY

When the CFPB was created in 2011, it took over enforcement of the Credit Card Accountability and Disclosure Act (“CARD Act”) from the Federal Reserve and adopted the Federal Reserve’s prior regulations. The CARD Act aims to “establish fair and transparent practices relating to the extension of credit,” including by regulating “excessive fees” by credit card companies. See Pub. L. No. 111 24, 132 Stat. 1734 (2009); S. Rep. 111–16, at 6 (2009).

To this end, the CARD Act allows credit card issuers to impose “penalty fee[s]” when a customer violates a credit card agreement by, for example, failing to make an on-time payment. See 15 U.S.C. § 1665d(a). Those penalty fees must be “reasonable and proportional to such omission or violation.” Id. To ensure penalty fees remain reasonable and proportional, the statute tasks the CFPB with “establish[ing] standards for assessing whether the amount of any penalty fee . . . is reasonable and proportional.” Id. § 1665d(b). The CFPB is directed to consider four factors in establishing standards: “(1) the cost incurred by the creditor from such omission or violation; (2) the deterrence of such omission or violation by the cardholder; (3) the conduct of the cardholder; and (4) such other factors as the Bureau may deem necessary or appropriate.” Id. § 1665d(c). Congress also authorized the CFPB to set a “safe harbor” amount for penalty fees that are “presumed” to be reasonable and proportional. Id. § 1665d(e).

From 2010 to 2023, the safe harbor amount was adjusted eight times for inflation. The current safe harbor caps penalty fees at $30 for a first violation and $41 for subsequent violations within six billing cycles. However, on March 5, 2024, under authority of the CARD Act, the CFPB amended 12 C.F.R. § 1026.52(b) (“Final Rule”) reducing late-fee safe harbor charges to $8. The Final Rule also prohibited large credit card issuers from adjusting such fees for inflation and capped the late fees to twenty-five percent of a consumer’s missed minimum payment. The Final Rule was slated to go into effect on May 14, 2024.

Two days after the Final Rule was issued, Plaintiffs—a group of trade associations—brought this action under the Administrative Procedure Act and moved for a preliminary injunction the same day. Plaintiff Fort Worth Chamber is the only plaintiff located within the Northern District of Texas, where Plaintiffs brought suit. Perplexingly, none of the actual banks or credit card issuers affected by the Final Rule are parties to this suit, and none are headquartered in the Fort Worth Division. On March 21, 2024, before the Court ruled on the preliminary injunction, Defendants filed a Motion t Transfer the Case to the United States District Court for the District of Columbia. The Court granted the motion on March 28, 2024. However, eleven days later, the Fifth Circuit granted mandamus relief to Plaintiffs and ordered this Court to reopen the case. The opinion from the Fifth Circuit was then released on April 30, 2024, directing this Court to rule on the merits of the preliminary injunction by May 10, 2024. The Fifth Circuit did not rule on the merits of the transfer—only that transferring the case prior to making findings and conclusions for the preliminary injunction was an “effective denial” of the Motion for Preliminary Injunction.

On May 10, 2024, this Court granted Plaintiffs’ Motion for Preliminary Injunction, thereby staying the Final Rule. The Court’s decision relied on Fifth Circuit precedent holding that the CFPB was unconstitutionally funded under the Appropriations Clause. Under that precedent, the Final Rule was improperly promulgated. But six days after this Court granted the preliminary injunction, the United States Supreme Court issued its opinion in Consumer Financial Protection Bureau v. Community Financial Services Association of America, Ltd. (hereinafter “ ”), reversing the Fifth Circuit decision that this Court relied on in granting the preliminary injunction. 601 U.S. 416 (2024).

Despite granting the preliminary injunction, the Court revisited the still-unsettled matter of venue on May 28, 2024. And having already completed the analysis in its prior order, the Court again granted Defendants’ Motion to Transfer to the District of Columbia. Plaintiffs again sought mandamus relief, and on July 15, 2024, the Fifth Circuit vacated the transfer order, this time ruling on the merits of the transfer analysis.

Three days later, on July 18, 2024, based on the Supreme Court’s decision in CFSA, Defendants filed a Motion to Dissolve the Preliminary Injunction. Then, on July 29, 2024, the Defendants filed a Motion to Dismiss the Fort Worth Chamber of Commerce for Lack of Standing and Transfer This Case to the U.S. District Court for the District of Columbia. The Court now addresses those two Motions.

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