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Looking to push back Biden's consumer protections, industry groups flock to Texas courts

The Biden Administration has focused regulatory agencies on tackling junk fees across industries. The Federal Trade Commission proposed a rule last fall that would “prohibit ... misrepresenting the total costs of goods and services by omitting mandatory fees from advertised prices and misrepresenting the nature and purpose of fees.” The rule, which has been delayed, would include rental fees.
Susan Walsh/AP
Biden Administration efforts to curb so-called hidden and excessive fees and to bolster fair lending rules have been met with a host of legal challenges from industry groups. Several are playing out in in federal courts in Texas.

In federal courts across Texas, powerful business interests and federal regulators are duking it out over several Biden Administration efforts aimed at reining in corporate power, increasing consumer protections and making financial services more equitable.

In several federal lawsuits, lobby groups representing an array of industries are pushing back, arguing in cases filed in courts across the state that the administration is going too far and creating excessive burden.

The lawsuits potentially could impact credit cards, small business loans, banking services, auto sales and retirement savings accounts. The plaintiffs and lawyers involved are mostly based in Washington, DC, and are suing federal agencies located in the capital.

The consequences are national in scope, but Ann Baddour from the progressive nonprofit Texas Appleseed said Texans stand to lose if federal courts strike down the Biden Administration rules.

“Texas has fairly weak standards when it comes to [consumer] protections,” said Baddour, who also leads the Texas Fair Lending Alliance. “And so the effects of these protections are really meaningful in terms of benefiting people.”

Why these cases are happening — and even what’s at stake — depends on who you ask. But there is broad agreement on one thing: These industry-backed lawsuits are filed in federal courts in Texas because big businesses have a better chance of prevailing here, and this kind of forum shopping is totally legal.

“The federal bench in Texas is generally quite a bit more conservative and business-oriented than, let's say, district court judges in California or New York or other blue states,” said Alan Kaplinsky, an attorney with the law firm Ballard Spahr who runs the Consumer Finance Monitor blog.

Not only does Texas have a density of conservative judges at the district level, the Fifth Circuit Court of Appeals, which covers Texas, Mississippi and Louisiana, is packed with jurists who are skeptical of regulations on business.

While plaintiffs across the political spectrum will seek out the venue where they’re most likely to find a sympathetic judge, University of California, Irvine School of Law professor Dalié Jiménez, a former Consumer Financial Protection Bureau lawyer, thinks the landscape of Texas federal courts is particularly advantageous to corporate interests seeking to kill regulations.

“In some cases where they file in one location [within the district] where there’s only one judge, they know they’ll get that one judge,” Jiménez said.

High stakes

In most of these cases in Texas, judges appointed by Donald Trump are presiding. Tony Carrk, executive director of the nonprofit watchdog Accountable.US, said Trump’s appointments across the federal bench supercharged a decades-long effort to stack the federal bench with judges skeptical of efforts to rein in corporate power.

The federal bench in Texas is generally quite a bit more conservative and business-oriented than, let's say, district court judges in California or New York or other blue states.
Alan Kaplinsky

“Because we have the Supreme Court makeup that we do now, because we have the Fifth Circuit Court of Appeals makeup that we do now, and in these district courts, it is ripe for the right and big corporate interests to exploit that,” Carrk said.

Carrk said these fights are complicated and legalistic, but the stakes are more straightforward.

“You have clearly a corporate interest that's looking out for their bottom line -- looking out for their CEOs, looking out for their shareholders,” Carrk said. “And you have the administration that is trying to take on these powerful interests to lower costs for people. These measures, they're pro-consumer, they're pro-worker, they're intended to lower costs for people.”

But Kaplinsky tells it a different way. National groups representing big banks, major corporations and other business interests are reacting to a Biden Administration hostile to industry where regulators are stretching the law in the name of consumer protection, he said.

“The extent you regulate an industry, those costs, a lot of them get passed on to other consumers, in the form of higher prices or reduction in service. So you have to pay the piper,” Kaplinsky said.

Industry groups have been more hesitant in the past to sue the agencies that regulate their members, Kaplinsky said, with lawsuits like the ones playing out in Texas relatively rare.

“[Federal regulatory agencies] all have moved very far left. But I would say if there was a competition for the agency that that has gone the most extreme, the CFPB would win that prize hands down,” Kaplinsky said.

He said Rohit Chopra, head of the CFPB, has taken a particularly combative approach to the financial services firms his bureau polices. Industry groups used to have a greater say in shaping CFPB regulations under both the Obama and Trump administrations, Kaplinsky said.

“Early in Rohit Chopra's tenure, he recognized that a number of things that he would do would probably be challenged. And I sort of remember his attitude at the time being, ‘Bring it on. We need to get some of these issues clarified,’” Kaplinsky said. “He made it clear he didn't mind getting sued.”

Baddour counters that, as an outsider and a consumer rights advocate, the CFPB has appeared assertive in its effort to help working families, but reasonable.

‘They don’t like it’

Perhaps the most high-profile of the legal battles is over a CFPB rule issued by the Consumer Financial Protection Bureau in January that would limit how much money credit card companies can charge customers for late payments. It says credit card companies can only charge what it actually costs them.

Touting the new rule during his last State of the Union address, Biden said that it would slash late fees from an average of $32 to $8.

“The credit card companies don’t like it, but I’m saving American families $20 billion a year with all of the junk fees I’m eliminating,” Biden said.

But that rule was blocked by U.S. District Judge Mark Pittman, a Trump appointee in the Fort Worth courthouse of Texas’ Northern District. The U.S. Chamber of Commerce filed suit alongside the banking lobbies and in conjunction with the Fort Worth Chamber of Commerce. That gave the groups standing to bring suit in that court.

The groups argued the credit card late fee rule wasn’t correctly promulgated and violates federal law.

While Pittman blocked the rule from going into effect, he also sided with the CFPB when the bureau filed a motion arguing the case should be adjudicated in Washington, D.C. rather than in Fort Worth. After all, he noted, almost all of the lawyers and organizations involved were located in the capital.

However, the Fifth Circuit Court of Appeals overruled Pittman, and sent the case back to Fort Worth. Last week, after Pittman againordered the case moved, the appeals court stopped him again.

Although the federal Judicial Conference recently announced a new case assignment policy aimed at curbing judge-shopping, it was only a recommendation. In the trial courts in the Northern District of Texas, trial court judges have reportedly refused to enact the policy.

“This kind of forum shopping judge shopping in some cases really only is possible for certain plaintiffs: Very well-funded plaintiffs,” Jiménez said.

According to an Accountable.US report, the U.S. Chamber of Commerce has filed about 63% of its lawsuitschallenging federal regulations since 2017 in the Fifth Circuit's jurisdiction.

While litigants across the political spectrum have always sought the most favorable venue, forum shopping like this used to be less blatant and less common, Jiménez said — a product of norms among lawyers rather than any legal or ethical prohibition. But as the federal courts have polarized, she thinks lawyers increasingly feel they have to coach their clients to forum shop. And that undermines the courts, she said.

"We are poisoning the rule of law. And the regular person on the street doesn’t think it’s fair. And it isn’t fair," she said.

Other cases

In the Fifth Circuit, industry groups are challenging a Federal Trade Commission rule that would block car dealers from misrepresenting the final price of a vehicle or charging consumers for added services that don’t provide any additional benefits, like duplicative warranties. The FTC paused the rule in January until the appeals court decides its fate. All of the lawyers in the case are based in the Washington, DC, area.

In the Northern District of Texas, banking and business groups sued federal banking agencies in February in the Amarillo subdivision where U.S. District Judge Matthew Kacsmaryk, a Trump appointee who has garnered national attention for controversial rulings, is the only judge. Eleven of the 13 plaintiffs’ lawyers are based in Washington, DC, with two based in Amarillo.

The lawsuit challenges a Biden Administration update to 1971 Community Reinvestment Act rules that require banks to fairly serve low- and middle-income customers in their market. The new rule would require banks to follow those fair lending rules in any area where they offer loans, not just where they have physical branches.

The banking agencies say it updates the law in an age of increasingly online banking, but industry groups say the new rules go too far. Kacsmaryk ordered an injunction stopping the rules from going into effect, and the Fifth Circuit is now considering an appeal.

We are poisoning the rule of law. And the regular person on the street doesn’t think it’s fair. And it isn’t fair.
Dalié Jiménez

Also in the Northern District, insurance trade groups are suing the U.S. Department of Labor in the Fort Worth subdivision. They oppose a rule that would require agents to act solely in the best interest of investors when advising them on retirement savings accounts. The nine industry associations argued in their lawsuit, overseen by O’Connor, that requiring them to give fiduciary advice on retirement investments violates the law and could cause the industry to limit investment options for lower-income workers. Four of the five plaintiff’s lawyers in that case are based in DC.

In Texas’ Eastern District, the US Chamber of Commerce and other business and banking lobbies successfully sued to block an update to a manual that guides how CFPB examiners look for violations to a prohibition against unfair, deceptive, or abusive practices in the consumer finance industry.

The groups say CFPB exceeded its authority, was arbitrary, didn’t follow rulemaking process correctly, and is illegally trying to crack down on discriminatory outcomes and not just discriminatory intent. The Bureau rejected their claims, and argued the industry groups are trying to argue that conduct cannot be deemed unfair – and therefore prohibited – if it is also discriminatory.  

U.S. District Judge J. Campbell Barker, one of two Trump appointees in the Tyler courthouse, sided with the industry groups last fall. The CFPB has appealed the ruling to the Fifth Circuit. Five of the six industry lawyers are based in the DC area, as are both of the government’s attorneys.

In Texas’ Southern District, banking industry groups filed a challenge to a CFPB small business lending rule in the McAllen courthouse, where both district judges are Republican appointees. U.S. District Judge Randy Crane, a George W. Bush appointee, temporarily stopped the rule from going into effect.

The rule would require small-business lenders to report detailed data including the demographics of their applicants, reasons loans were denied, pricing and other information. Banks, financial technology firms and other lender groups say the requirements are onerous and exceed the Bureau’s authority. The 2010 Dodd-Frank Act requires the CFPB to collect data to ensure the $2 trillion small business loan market is operating fairly, and the Bureau argued this rule accomplishes that.


This and other cases challenging CFPB rules were on hold until the U.S. Supreme Court ruled on a lawsuit challenging the constitutionality of the Bureau itself. The question of the CFPB’s constitutionality came out of a lawsuit filed by payday lenders’ trade associations challenging a consumer protection rule in a Texas federal court in 2018.

The Supreme Court rejected the payday lenders’ challenge in May, upholding the CFPB’s constitutionality and overturning the Fifth Circuit.

Ann Baddour said even when industry challenges to consumer protection rules ultimately lose, they still cause harm. For the six years the case was pending, Texans lived without the benefits of the rule, leaving them more likely to end up in a spiral of debt they can’t afford to pay back.

“It's not bad that these issues had their day in court. But what's concerning is the kind of delay that this tactic has on really beneficial rules that could, if they were allowed to go into effect, have substantial impacts on the bottom lines of families,” Baddour said.

The next election almost surely will play a major role in determining how industry-friendly the CFPB and other federal regulators will be. Baddour said delays in the past have helped corporations avoid rules they didn’t like in the past.

With four more years of Biden, Kaplinsky expects to see continued efforts to push the boundaries of consumer protections and more lawsuits from business and bank lobbies to block it. If Trump gets elected, he said, the CFPB and others will turn on a dime, likely unwinding Biden’s junk fee and fair lending efforts and returning to a more pro-industry approach.

“Things will change very quickly. We saw that happen once already when we went from Obama to Trump and then Trump to Biden,” Kaplinsky said.

Got a tip? Christopher Connelly is KERA's One Crisis Away Reporter, exploring life on the financial edge. Email Christopher at can follow Christopher on Twitter @hithisischris.

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Christopher Connelly is a reporter covering issues related to financial instability and poverty for KERA’s One Crisis Away series. In 2015, he joined KERA to report on Fort Worth and Tarrant County. From Fort Worth, he also focused on politics and criminal justice stories.