Last week ended with several new developments in the lawsuit challenging the CFPB’s final credit card late fee rule (Rule), both of which appear to reduce the likelihood that the Rule will be stayed before its May 14 effective date.

First, the CFPB filed a Petition for Panel Rehearing on April 18 and the Fifth Circuit has directed the plaintiffs to file a response by April 30.  (Under Federal Rule of Appellate Procedure 40, no response to a petition for panel rehearing is permitted unless requested by the court.  Rule 40 also provides that “[o]rdinarily, rehearing will not be granted in the absence of such a request.”)

In its petition, the CFPB argues that the Fifth Circuit panel should reconsider its decision vacating the district court’s order transferring the case to the U.S. District Court for the District of Columbia and issuing a writ of mandamus directing the district court to reopen the case for the following reasons:

  • The panel’s determination that the district court effectively denied the plaintiffs’ motion for a preliminary injunction and the plaintiffs had therefore filed a valid interlocutory appeal rested on key factual errors.  Most significantly, it rested on the premise that to comply with the Rule, credit card issuers would have to print and distribute disclosures about late fees to cardholders by March 29.  TILA does not require advance notice for the only change the Rule would require—a reduction in the maximum late fee.  Also, it is not true, as the panel suggested, that the district court had not acted promptly enough to preserve the plaintiffs’ opportunity for effective permanent relief.  Whether or not the plaintiffs are saved from the cost of preparing new disclosures for distribution after the Rule’s May 14 effective date, a court could still effectively grant them the permanent relief they seek, namely reinstatement of the old rule’s late fee safe harbor.
  • The approach taken in the panel’s decision improperly interferes with the authority of district courts to manage their own dockets, leading to practical and legal difficulties in this case and other cases.  Prior to the panel’s decision, Fifth Circuit precedent provided a clear standard for when a district court should prioritize a preliminary injunction motion over other matters on its docket—a “strong showing of apparent need” was required.  That standard is no longer clear since the plaintiffs “secured jurisdiction [for their appeal] even though the March 29 deadline was illusory: nothing needed to be accomplished by March 29 for Plaintiffs to get effective relief.”  Also, the Fifth Circuit replaced its judgment regarding the need for expedition for the district court’s assessment that expedition of the plaintiffs’ preliminary injunction motion was not warranted.  The dilution of the apparent-need standard and of the deference given district courts will “create untenable uncertainty for district judges facing even the flimsiest requests for extreme expedition.”  As a result, district courts will have less ability to manage their dockets, including to evaluate significant threshold issues such as motions to transfer venue, and the Fifth Circuit “could face a spate of effective-denial appeals before district courts have had the appropriate chance to weigh in.”

Second, the Fifth Circuit issued a notice setting an expedited briefing schedule for the plaintiffs’ appeal from the “effective denial” of their motion for a preliminary injunction.  Under the expedited schedule, the plaintiffs must file their brief by April 26, the CFPB must file its brief by May 13, and the plaintiffs must file their reply brief by May 17.  The briefing schedule means that unless the Fifth Circuit issues an injunction pending the outcome of the appeal, no injunction will be in place before the Rule’s May 14 effective date.  On March 25, the date on which the plaintiffs filed their Notice of Appeal, the plaintiffs also filed an emergency motion with the Fifth Circuit seeking an administrative stay of the Rule “and, ultimately, an injunction [to enjoin the Rule] pending appeal.”  The CFPB has opposed the plaintiffs’ request for an injunction pending appeal.