Texas Federal Judge Issues Stay in CFPB CARD Act Case

Last week, a federal judge for the U.S. District Court for the Northern District of Texas granted plaintiff’s motion for a preliminary injunction and issued a stay preventing the CFPB’s new rule decreasing the presumptively reasonable and proportional “safe harbor” amount for credit card late fees under the CARD Act from going into effect.

This ruling comes after the Fifth Circuit issued a panel order reversing the district court’s transfer of the case.  The Fifth Circuit denied the CFPB’s motion for rehearing and remanded the case to the district court for a ruling on the CFPB’s motion for preliminary injunction. 

The district court granted the preliminary injunction on the basis that the Fifth Circuit has held that the CFPB’s funding structure is unconstitutional, and therefore any regulations promulgated under that funding structure are likely also unconstitutional.  The CFPB has appealed the Fifth Circuit’s holding that the CFPB’s funding structure is unconstitutional to the Supreme Court, which has not yet issued a ruling.