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Fifth Circuit's Decision on Credit Card Late Fee Lawsuit: Implications for Credit Unions


The U.S. Court of Appeals for the Fifth Circuit recently issued a pivotal order that reverses the district court's decision regarding the lawsuit challenging the Consumer Financial Protection Bureau's (CFPB) credit card late fee rule. This ruling is a significant development in the ongoing legal battle over the rule's constitutionality and its alignment with the Administrative Procedure Act. The Virginia Credit Union League is closely monitoring these developments to provide our members with crucial insights and guidance on navigating the evolving regulatory landscape.

Background of the Case

Several trade groups, including prominent chambers of commerce and banking associations, initiated this lawsuit in the Northern District of Texas. They argued that the CFPB's late fee rule was unconstitutional and violated the Administrative Procedure Act, requesting a preliminary injunction to halt the rule's implementation until the case's conclusion. However, the district court delayed ruling on this request, leading to the trade groups appealing for a writ of mandamus and a subsequent court order to transfer the case to the District of Columbia, which the Fifth Circuit has now reversed due to jurisdiction issues.

Implications for Credit Unions

The Fifth Circuit's decision underscores the complexity of the regulatory environment surrounding credit card late fees and highlights the importance of Virginia’s credit unions staying informed about ongoing litigation that may affect their operations. Here are the key takeaways:

  • Jurisdictional Rulings: The appellate court's ruling focuses on jurisdiction, vacating the transfer order and emphasizing that once an appeal is in motion, the lower court lacks jurisdiction to alter the case's status.
  • Preliminary Injunction Appeal: A separate appeal regarding the preliminary injunction's effective denial remains pending. This appeal is critical, as it addresses the immediate impacts of the CFPB's late fee rule on credit union operations.
  • Urgency and Compliance Burdens: The Fifth Circuit acknowledged the urgency and burdens placed on credit issuers by the new rule, recognizing the need for swift adjudication.

Navigating the Changes

As the legal proceedings continue, credit unions must remain vigilant and prepared to adapt to potential changes in late fee regulations. The League recommends:

  • Staying Informed: Keep abreast of legal developments and understand their potential impact on your credit union.
  • Compliance Planning: Review your current late fee policies and prepare for possible adjustments in light of the evolving regulatory framework.
  • Member Communication: Be ready to communicate any changes in fee structures to your members transparently and effectively.

The Virginia Credit Union League is committed to supporting our members through this period of regulatory uncertainty. We will continue to provide updates and analysis on this case and other regulatory developments affecting credit unions. Your ability to serve your members effectively depends on navigating these changes confidently, and we're here to help guide you through them.

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