Lawmakers Blocked From Case Testing Cordray’s Independence

By Chris Bruce

A federal appeals court in Washington Feb. 2 blocked a bid by two Democratic lawmakers to join a court proceeding that could decide the fate of Consumer Financial Protection Bureau Director Richard Cordray ( PHH Corp. v. Consumer Fin. Prot. Bureau , D.C. Cir., No. 15-cv-01177, 2/2/17 ).

At issue in the U.S. Court of Appeals for the District of Columbia Circuit is a CFPB petition to review an October ruling that said the CFPB director may be removed by the president without cause.

Sen. Sherrod Brown (D-Ohio) and Rep. Maxine Waters (D-Calif.) Jan. 26 sought to intervene in the case, citing the election of President Donald Trump and calls by congressional Republicans to remove Cordray. They said the October ruling was wrongly decided, and that important constitutional questions raised by the case need more attention.

But the D.C. Circuit denied their motion in a brief Feb. 2 order that didn’t elaborate. The court also denied a motion to intervene filed by attorneys general from 16 states and the District of Columbia, and a similar motion by a coalition of consumer advocates.

PHH Welcomes Decision

“PHH is gratified that the Court stepped in to summarily dismiss these motions to intervene,” Helgi C. Walker, a partner with Gibson, Dunn & Crutcher who represents PHH, said in an email to Bloomberg BNA. “As we said in our oppositions, the motions were baseless and without merit, as well as more than a year and a half late.”

A CFPB spokesman declined to comment on the ruling. Rep. Waters said she was disappointed by the decision, but not dissuaded.

“Financial Services Committee Democrats and our colleagues in the Senate will continue to fight every day for hard-working Americans who have fallen victim to predatory practices and the strong consumer watchdog that Dodd-Frank created to hold bad actors accountable,” Waters said in an e-mail to Bloomberg BNA.

Joseph T. Lynyak III, a partner in the Washington and Los Angeles offices of Dorsey & Whitney who represents financial institutions, said the ruling doesn’t come as a surprise. He said both sides in the case have already been able to address the main question, which is whether the full D.C. Circuit should review the October panel decision. Such reviews are rarely granted, he added.

And if the court does grant the petition, he said, the various parties may still be able to participate as friends of the court. “This ruling does not stop those parties from asking permission if the en banc review is granted to file amicus briefs,” Lynyak told Bloomberg BNA Feb. 2.

The Latest Turn

The ruling is the latest turn in a confrontation between the CFPB, a new consumer protection watchdog established by the 2010 Dodd-Frank Act, and PHH, a New Jersey-based mortgage company.

In 2015, Cordray ordered PHH to give up $109 million in payments that Cordray said violated the Real Estate Settlement Procedures Act (RESPA). PHH appealed, and in October, a three-judge panel vacated the $109 million order and rejected the CFPB’s reading of RESPA.

Two judges on the panel went further, saying the CFPB’s single-director leadership structure violates the U.S. Constitution. That order has been stayed while the D.C. Circuit’s full complement of judges weighs the CFPB’s petition. But left undisturbed, the October ruling leaves Cordray exposed to the possibility of immediate dismissal by President Donald Trump.

So far, Trump hasn’t far signaled any specific intentions with respect to Cordray or the CFPB in particular, although he recently pledged an overhaul of Dodd-Frank in an effort to boost lending.

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

To contact the editor responsible for this story: Michael Ferullo at MFerullo@bna.com

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