On Thursday, April 18, 2024, Bloomberg Law reported that an investigation cleared Fifth Circuit Judge Don Willett of needing to recuse himself from hearing a case involving Citigroup’s challenge to new credit card fee rules.

The case examines a Consumer Financial Protection Bureau rule introduced in March 2024 that aims to cap credit card late fees at $8. Citigroup is one of the largest credit card issuers in the United States and is part of a lawsuit brought by several banking industry trade groups seeking to block the new rule from taking effect. Questions were raised about Judge Willett’s impartiality because financial disclosures showed he owned stock in Citigroup through a college savings account for one of his children.

However, Judge Gerald McHugh, acting chairman of the Judicial Conference’s Committee on Codes of Conduct, determined Judge Willett’s indirect stock ownership in Citigroup through the education savings fund was too “indirect and contingent” to require recusal. Judge McHugh noted past ethics committee decisions have found stock ownership in a company belonging to a litigating trade group alone does not automatically warrant recusal. He said adopting the standard pushed by the CFPB that any time concerns are raised, a judge must recuse could seriously undermine the judicial system.

While Judge Willett agreed the size of his financial stake was minimal at $2,000, he authored a split appellate panel decision in early April that blocked a lower court’s attempt to transfer the credit card fee case to a federal court in Washington D.C. where most of the plaintiffs and attorneys have offices. The Fifth Circuit ruled the Texas court overstepped by effectively denying an initial request from industry groups to pause the CFPB rule pending litigation.

With the ethics investigation now complete, Judge Willett and the Fifth Circuit will move forward considering whether to grant a preliminary injunction delaying the credit card fee limits from taking effect as planned on May 14, 2024. The court’s ruling could impact billions in annual revenue major banks collect from penalty fees if the CFPB rule is allowed to proceed.



Source: Bloomberg Law