Federal Court Enjoins Regulation Z Amendment

A federal judge in Sioux Falls, South Dakota, has issued a preliminary injunction to postpone and enjoin the effective date of a recent amendment to Federal Reserve Board Regulation Z.

The case was brought by credit card issuer First Premier Bank and its subsidiary Premier Bankcard, LLC (collectively First Premier) against the Bureau of Consumer Financial Protection (which now has enforcement authority over plaintiffs for violations of Regulation Z) and Treasury Secretary Timothy Geithner. First Premier alleged that the Federal Reserve Board exceeded its rulemaking authority under the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (the Credit CARD Act) in promulgating a final rule amending part of Regulation Z (12 C.F.R. § 226.52) on March 18, 2011.

The Credit CARD Act (15 U.S.C. § 1637(n)) and amendments to Regulation Z promulgated in 2010 limited certain fees (other than late payment fees, over-limit fees and NSF fees) charged on a credit card account during the first year after opening the account to no more than 25% of the initial credit limit for the account. However, the Federal Reserve Board’s final rule promulgated on March 18, 2011, published on April 25, 2011, and which had been scheduled to become effective October 1, 2011, expanded that prohibition to include fees charged before credit card accounts are opened. First Premier offers a credit card product which charges consumers up-front fees prior to account opening which range from $25 to $95 per account, and such fees would, in some cases, violate the March 18, 2011 final rule.

The District Court agreed with First Premier that the Federal Reserve Board’s March 18, 2011 final rule exceeded the Board’s rulemaking authority, and the Court indefinitely postponed the effective date of that rule and enjoined its enforcement.

This blog is made available by Foley & Lardner LLP (“Foley” or “the Firm”) for informational purposes only. It is not meant to convey the Firm’s legal position on behalf of any client, nor is it intended to convey specific legal advice. Any opinions expressed in this article do not necessarily reflect the views of Foley & Lardner LLP, its partners, or its clients. Accordingly, do not act upon this information without seeking counsel from a licensed attorney. This blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Communicating with Foley through this website by email, blog post, or otherwise, does not create an attorney-client relationship for any legal matter. Therefore, any communication or material you transmit to Foley through this blog, whether by email, blog post or any other manner, will not be treated as confidential or proprietary. The information on this blog is published “AS IS” and is not guaranteed to be complete, accurate, and or up-to-date. Foley makes no representations or warranties of any kind, express or implied, as to the operation or content of the site. Foley expressly disclaims all other guarantees, warranties, conditions and representations of any kind, either express or implied, whether arising under any statute, law, commercial use or otherwise, including implied warranties of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Foley or any of its partners, officers, employees, agents or affiliates be liable, directly or indirectly, under any theory of law (contract, tort, negligence or otherwise), to you or anyone else, for any claims, losses or damages, direct, indirect special, incidental, punitive or consequential, resulting from or occasioned by the creation, use of or reliance on this site (including information and other content) or any third party websites or the information, resources or material accessed through any such websites. In some jurisdictions, the contents of this blog may be considered Attorney Advertising. If applicable, please note that prior results do not guarantee a similar outcome. Photographs are for dramatization purposes only and may include models. Likenesses do not necessarily imply current client, partnership or employee status.