ABSTRACT: The banking industry and financial services business groups scored a victory in challenging a recent rule enacted by the Consumer Financial Protection Bureau when Judge Pittman granted a preliminary injunction staying the amendment to Regulation Z.

We have an update to our prior blog post regarding the Consumer Financial Protection Bureau’s (“CFPB”) recent Final Rule capping late payment credit card fees.

The CFPB’s Final Rule was set to go into effect on May 14, 2024.  However, on Friday, May 10, 2024 Judge Mark Pittman, of the Northern District of Texas, granted the Plaintiffs’ motion for a preliminary injunction staying the CFPB’s amendment to the Regulation Z, 12 C.F.R §1206.

The litigation arising from the CFPB’s Final Rule has been on a bit of a roller coaster ride so far.  The Northern District of Texas issued an Order transferring the case to the District of D.C. However, the Fifth Circuit reversed the transfer Order and returned the case to Texas with direction to address the merits of the case controlling Fifth Circuit precedent (see our related blog post)[1].

The American Bankers Association and other financial services business groups (collectively the “ABA”) sought a preliminary injunction on the basis that (1) the Final Rule was promulgated with funds drawn in violation of the Appropriations Clause; and (2) the Final Rule violates the CARD Act, TILA, and the APA. The Fifth Circuit recently ruled that the CFPB’s funding structure is unconstitutional, and based on that precedent Judge Pittman found a preliminary injunction staying the Final Rule was warranted.  

Baker Sterchi attorneys will continue to monitor the litigation arising out of the CFPB’s Final Rule and currently pending before the United States Supreme Court. Contact our Financial Services Practice Group for more information.

[1] Last year, the Fifth Circuit issued an opinion finding the CFPB’s funding structure to be unconstitutional.  If upheld by the U.S. Supreme Court, the likely outcome will be a finding that rules issued by the CFPB are similarly unconstitutional.