Power of Consumer Protection Agency Up for Review

The full D.C. Court of Appeals has agreed to reconsider whether the Consumer Financial Protection Bureau’s leadership structure is unconstitutional in a dispute over a $103 million fine against PHH, a mortgage lender.

The appeals court Thursday granted the CFPB’s request for en banc (full court) rehearing of a three-judge panel’s October 5 ruling that CFPB’s leadership structure is unconstitutional and reversed the PHH fine.

The CFPB is a government agency created after the financial crisis to protect consumers.

In the current case, PHH was fined $6 million by an administrative law judge for allegedly receiving kickbacks from mortgage insurers for referring consumers buying mortgages from PHH. The CFPB Director Richard Cordray used his authority to increase the fine by $103 million and the company sued.

Cordray ordered PHH to disgorge $109 million, which amounted to all the reinsurance premiums it received since 2008.

PHH challenged the fine and also the constitutionality of the CFPB. The three-judge panel unanimously agreed that CFPB’s structure gave the director too much power.

“Because the director alone heads the agency without presidential supervision, and in light of the CFPB’s broad authority over the U.S. economy, the director enjoys significantly more unilateral power than any single member of any other independent agency,” the panel wrote back in October.

On Thursday a majority of 10 of the court’s 11 judges voted to reconsider that ruling. Only the chief judge, Merrick Garland did not participate in the vote.  Briefing is set for completion in April. Arguments will come in the months following and no ruling is expected before the end of the year.

Case: PHH Corp. v. CFPB, No. 15-1177

 

 

 

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