By Jacob Bielanski
While reactions to the District of Columbia federal appellate court’s ruling in PHH Corporation v. CFPB upholding the single-director structure of the Consumer Financial Protection Bureau drew predictably divided responses, the court’s vacating of the Real Estate Settlement Procedures Act (RESPA) penalty drew praise from some critics of the consumer watchdog.
The case technically revolves around a challenge to a $109 million penalty assessed against a mortgage insurer, but critics of the CFPB had used the plaintiff PHH Corp.’s argument against the constitutionality of the Bureau’s structure as a rallying cry. While the latest 6-3 ruling by the D.C. Circuit Court of Appeals is notable to most for upholding that structure, the panel also vacated the penalty (see Banking and Finance Law Daily, Jan. 31, 2018).
"We applaud the Court’s decision to repeal the amplified penalty on PHH, which undermined the longstanding application of RESPA," read a statement from the Consumer Bankers Association. "While the Court ruled the CFPB’s governing structure was not unconstitutional, it does not mean the current structure is appropriate for the Bureau’s long-term credibility."
Reaction by the House Financial Services Committee appeared divided along partisan lines, with its Republican Chair, Rep. Jeb Hensarling (R-Texas), saying he was "deeply disappointed," while Ranking Member, Rep. Maxine Waters (D-Calif), said that the ruling "confirmed what we have always known." "The independence of the [CFPB] is essential to ensure that the agency can operate as a tough regulator that stands up for consumers," Waters said.
Other proponents of the ruling included consumer rights advocacy groups, including the Center for Responsible Lending, Public Citizen Litigation Group, National Consumer Law Center, Consumer Federation of America, and Americans for Financial Relief.
A statement from PHH Corp. praised the decision to vacate the penalty, but made no mention of the decision regarding the CFPB’s legal structure.
Comments also pointed to the fights that could loom in the wake of the decision, including the possibility for appeal and the status of the Bureau’s "acting director" and current Director at the Office of Management and Budget, Mick Mulvaney. Mulvaney’s controversial appointment earlier this year was upheld, for the time being, after a federal district judge in a separate case denied an injunction against his appointment, pending a legal challenge by CFPB deputy director Leandra English. Proponents have used the latest ruling to renew the push for the President to nominate a permanent director to be confirmed by the Senate.
"While good news for consumers, the CFPB cannot be fully independent until a lawful Director is in place," Sen. Sherrod Brown (D-Ohio) said in a statement. The ruling assures that anyone confirmed under President Trump would remain in that role beyond the first term.
Meanwhile, critics pointed to ongoing efforts to reform the CFPB, including a federal district court challenge to the CFPB’s constitutionality in State National Bank of Big Spring v. CFPB supported by the Competitive Enterprise Institute (CEI). In a statement, CEI called the PHH Corp. ruling an "outrage to the spirit of the Constitution," and referred to Congress’s decision to establish the Bureau the way it did as a "mistake."
Additionally, Hensarling pointed to the possibility that the latest decision could be appealed to the U.S. Supreme Court, Until then, he said he supports efforts already underway by Mulvaney to reform the organization from within into one that would "execute the statutory mandate of the Bureau to protect consumers and go no further," a quote attributed to Mulvaney and a likely reference to critics’ argument that the CFPBs former director, Richard Cordray, exceeded the limits of his position. "I take great solace in the fact that [Mulvaney] can use his unchecked, unilateral powers to continue the agency’s transformation," Hensarling said.
Companies: Americans for Financial Relief (AFR); Center for Responsible Lending; Consumer Bankers Association; Consumer Federation of America; National Consumer Law Center; PHH Corporation; Public Citizen Litigation Group
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