CFPB Seeks Legal Edge in Enforcement Appeal

By Chris Bruce

Nov. 5 — The Consumer Financial Protection Bureau (CFPB), seeking to strengthen its position in an important enforcement case, Nov. 5 said a federal appeals court should defer to its reading of a federal mortgage law.

The case in the U.S. Court of Appeals for the District of Columbia Circuit marks the first challenge to a CFPB administrative ruling and subsequent action by CFPB Director Richard Cordray, and is expected to shape future enforcement actions by the federal consumer protection watchdog.

The case is an appeal by Mount Laurel, N.J.-based mortgage company PHH Corp. from a $109 million enforcement ruling in June by Cordray (108 BBD, 6/5/15).

Cordray, who upheld and expanded upon a ruling by an administrative judge, held PHH took kickbacks from mortgage insurers in violation of the Real Estate Settlement Procedures Act (RESPA) and ordered the company to give up $109 million in tainted payments.

In a Nov. 5 brief, the CFPB said the court should defer to its reading of RESPA under a 1984 U.S. Supreme Court ruling involving Chevron U.S.A. Inc., saying its action reflects a reasonable interpretation of the statute.

The agency rejected arguments that the court should review the issues under a different standard because of the potential for criminal penalties.

“This Court has never held that an agency is stripped of deference with respect to a statute it administers merely because provisions of the statute may be criminally enforced,” the brief said.

PHH Chief Optimistic

The brief was filed hours after PHH reported a net loss of $50 million in 2015's third quarter.

PHH President and Chief Executive Glen A. Messina Nov. 5 said he expects to prevail in the D.C. Circuit. Though the outcome is not certain, “we continue to believe that our appeal will be successful,” Messina said on a conference call.

In its petition to the D.C. Circuit following Cordray's decision in June, PHH asked the court to stay the CFPB's action, arguing that Cordray's ruling was based on “a radical new interpretation” of RESPA.

The D.C. Circuit granted the stay in August, saying PHH met the “stringent requirements” for such requests (150 BBD, 8/5/15).

The grant of the stay means the court believes PHH is likely to prevail on the merits of its case.

Final briefs are due in mid-December. Argument is expected in the spring and a ruling in the fall.

More than 20 companies and trade associations have intervened or filed friend-of-the court briefs in the D.C. Circuit.

To contact the reporter on this story: Chris Bruce in Washington at

To contact the editor responsible for this story: Seth Stern at