Banking and Finance Law Daily No Supreme Court challenge to CFPB structure constitutionality for now
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Friday, May 4, 2018

No Supreme Court challenge to CFPB structure constitutionality for now

By Richard A. Roth, J.D.

PHH Corporation apparently has decided not to ask the Supreme Court to consider whether the structure of the Consumer Financial Protection Bureau violates constitutional separation of powers principles or infringes impermissibly on presidential powers. Having convinced the U.S. Court of Appeals for the District of Columbia Circuit that the Bureau overreached when it reinterpreted the Real Estate Settlement Procedures Act and then attempted to enforce the new interpretation retroactively (Banking and Finance Law Daily, Jan. 31, 2018), the mortgage lender will take its chances in a renewed administrative proceeding rather than continue to litigate the constitutional battle.

A petition for certiorari must be filed with the Court within 90 days after the judgment being appealed (28 U.S.C. §2101). The D.C. Circuit’s decision was announced on Jan. 31, 2018, more than 90 days earlier, and there is no indication that the deadline has been extended by any of the Justices.

The D.C. Circuit decided that the Bureau’s new RESPA interpretation was wrong and that, even if it was right, it could not be applied retroactively. For the Bureau to prevail in the remanded administrative proceeding, it will need to prove that the reinsurance practices of PHH Corp. and its affiliates violated RESPA under the old interpretation of the law. It seems unlikely that the Bureau, now led by Acting Director Mick Mulvaney, will have much of an appetite for an aggressive enforcement action against a company that seemingly was complying with RESPA guidance at the time of its business arrangements.

PHH Corp.’s decision likely will disappoint those who hope to weaken, or even eliminate, the Bureau. However, given that the company seems likely to prevail in the administrative proceeding, which would relieve it of a $109 million disgorgement order, continuing to litigate the constitutional issues would be a lengthy, expensive, unnecessary, and possibly risky step.

However, given that the issue has been raised in several other pending cases, Supreme Court consideration remains a possibility.

Companies: PHH Corporation

MainStory: TopStory BankingFinance CFPB DistrictofColumbiaNews DoddFrankAct EnforcementActions FedTracker RESPA

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