D.C. Circuit Tells PHH, CFPB to Prep for Agency Structure Queries

By Chris Bruce

April 5 — A federal appeals court in Washington, D.C., has asked the Consumer Financial Protection Bureau and PHH Corp. to be ready for questions about the CFPB's governing structure during oral arguments next week.

PHH, a Mount Laurel, N.J.-based mortgage lender, has appealed to the U.S. Court of Appeals for the District of Columbia Circuit a June 2015 enforcement ruling that ordered the company to disgorge $109 million.

The CFPB said the company violated the Real Estate Settlement Procedures Act in its dealings with mortgage insurers.

Although arguments already were to include a focus on the CFPB's single-director leadership structure, the D.C. Circuit has added a new focus, asking the parties to prepare for questions about similarly structured agencies, and the appropriate remedy if, as PHH argues, the CFPB's structure is found to violate the U.S. Constitution.

The full text of the D.C. Circuit's order is: “PER CURIAM ORDER [1607052] filed, on the courts own motion, that the parties be prepared to address at oral argument on April 12, 2016, the following questions: (1) What independent agencies now or historically have been headed by a single person? For this purpose, consider an independent agency as an agency whose head is not removable at will but is removable only for cause; and (2) If an independent agency headed by a single person violates Article II as interpreted in Free Enterprise Fund v. PCAOB, 561 U.S. 477 (2010), what would the appropriate remedy be? Would the appropriate remedy be to sever the tenure and for-cause provisions of this statute, see 12 U.S.C. 5491(c)? Cf. Free Enterprise Fund, 561 U.S. at 508-10. Or is there a more appropriate remedy? And how would the remedy affect the legality of the Director's action in this case? Before Judges: Henderson, Kavanaugh and Randolph. [15-1177].”

As of late April 5, the order, which was dated April 4, had not appeared on the docket. It was included in a Bloomberg Law e-mailed docket alert, and designated as docket entry BL-53.

Argument is scheduled for 9:30 a.m. on April 12. The case is an important test of the CFPB's enforcement authority, and the extent to which courts must defer to the agency's reading of the law .

To contact the reporter on this story: Chris Bruce in Washington at cbruce@bna.com

To contact the editor responsible for this story: Mike Ferullo at mferullo@bna.com