CFPB Bid to Rehear PHH Ruling Has Good Odds, Case-Watchers Say

By Chris Bruce

Nov. 21 — The Consumer Financial Protection Bureau has better-than-even odds that a federal appeals court will review a recent ruling that could decide the agency’s future, case-watchers said ( PHH Corp. v. CFPB , D.C. Cir., No. 15-cv-01177, petition filed 11/18/16 ).

In October, two judges on a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit said the CFPB’s single-director leadership structure violated the U.S. Constitution. The CFPB Nov. 18 asked the full D.C. Circuit to rehear that ruling, saying the case may be the most important separation-of-powers case in a generation.

The D.C. Circuit’s full bench only rarely agrees to such requests. But Deepak Gupta, a former CFPB official and a partner with Gupta Wessler, said the case’s far-reaching legal questions and its importance for the CFPB’s future mean the D.C. Circuit’s full bench likely will grant the CFPB’s petition.

“I’m pretty confident that the full D.C. Circuit will rehear this case,” he said. “It’s a very important question, and it requires an answer soon because we’re about to have a change in administration.”

A Big Loss

In its October ruling, the D.C. Circuit panel held in favor of PHH Corp., a Mount Laurel, N.J., mortgage company that challenged a $109 million disgorgement order by CFPB Director Richard Cordray last year.

The ruling, if it stands, would be a major setback for the CFPB. Although only two judges ruled against the CFPB on the constitutional question, the entire three-judge panel said the CFPB violated PHH’s due process rights by retroactively applying a new and erroneous interpretation of the Real Estate Settlement Procedures Act. They also rejected the CFPB’s assertion that no statute of limitations applies to cases brought in its administrative forum.

In its petition, the CFPB asked the D.C. Circuit to review the constitutional question, and it said the panel’s holding on RESPA should be overturned. But it didn’t ask the court to review the statute of limitations issue.

In a Nov. 21 note on the case by Compass Point Research & Trading, analysts Isaac Boltansky and Fred Small said the odds “slightly favor” a decision to rehear the case. They said a decision on the petition could be announced in late January. If denied, the CFPB would then have 90 days to ask the U.S. Supreme Court to hear the case.

According to Gupta, the panel’s October ruling is at odds with U.S. Supreme Court precedent that goes back to the New Deal. He also said the case is significant in part because it will determine the future of the CFPB and its effectiveness.

“The agency has proven its value by delivering billions of dollars in relief for consumers and leveling the playing field in the market,” said Gupta. “All of that is up for grabs.”

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To contact the editor responsible for this story: Michael Ferullo at

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