InfoBytes Blog

5th Circuit reverses District Court’s decision to transfer credit card late fee case

On April 5, the U.S. Court of Appeals for the Fifth Circuit held that the U.S. District Court for the Northern District of Texas lacked jurisdiction to transfer a case challenging a CFPB rulemaking to the U.S. District Court for the District of Columbia. The 5^th Circuit’s decision did not examine whether the transfer order was proper, but rather whether the court had jurisdiction to enter it. As previously covered by InfoBytes, the U.S. District Court for the Northern District of Texas granted the CFPB a change of venue on March 28 because only one of the six plaintiffs resided in Fort Worth. The 5^th Circuit found that the lower court erred by granting the CFPB’s motion to change venues instead of ruling on the plaintiffs’ motion for preliminary injunction. The plaintiffs filed a writ of mandamus and argued the lower court “abused its discretion” by transferring the case while the plaintiffs’ appeal was outstanding, and that the lower court did not have jurisdiction to order the transfer. The 5^th Circuit agreed and ruled that once a party appeals a district court’s decision, the district court “has zero jurisdiction to do anything” to change the case. The 5^th Circuit granted the plaintiffs’ petition of mandamus, vacated the district court’s transfer order, and ordered the district court to reopen the case.

This case has been brought by multiple trade organizations to challenge the CFPB’s attempt to alter the structure and amount of credit card late fees through its alleged authority under the CARD Act, as covered by InfoBytes here. 

Courts Credit Cards Overdrafts Fees Junk Fees CFPB

CFPB examines consumer overdraft experiences

On May 18, the CFPB published a data spotlight reporting on consumers’ experiences with overdraft programs. The Bureau conducted interviews and focus groups with low- and moderate-income consumers last summer where participants were asked about their use of deposit accounts and debit cards, their understanding of overdraft fees and non-sufficient funds (NSF) fees, and their perceptions of ways to avoid these fees. The Bureau found that, among other things, many consumers were not aware of their financial institution’s overdraft policies and thought protection automatically came with their account, while others were unaware that they could end overdraft protection. Others expressed concerns about fees, payment timing, and notifications, with some consumers saying that the typical $35 overdraft fee was “excessive” and “not necessarily proportional to the covered transaction.” Additional concerns flagged by consumers included: (i) financial hardships and fee waivers due to cascading overdraft fees; (ii) negative balances due to delayed merchant holds or delayed deposits; (iii) account closures because of overdraft fees, leading to difficulties when opening new accounts for some consumers; and (iv) limited awareness of various account options, including deposit accounts without overdraft fees and second-chance accounts. The Bureau reported that while some financial institutions have reduced or eliminated overdraft and NSF fees, implementation is “uneven and impermanent,” so consumers may not yet have benefited from the changes.

Federal Issues CFPB Consumer Finance Overdrafts NSF Fees