Ocwen Presses for Early Verdict on CFPB’s Constitutionality

By Chris Bruce

Ocwen Financial Corp. is pressing its bid for an early case conference on whether the Consumer Financial Protection Bureau is unconstitutional ( Cons. Fin. protection Bureau v. Ocwen Fin. Corp. , S.D. Fla., 17-cv-80495, reply filed 5/9/17 ).

Ocwen’s filing in the U.S. District Court for the Southern District of Florida marks the latest of several fast-moving developments after the CFPB sued Ocwen in April for allegedly violating consumer protection laws in servicing loans of distressed borrowers.

Ocwen, which initially asked the court to schedule a conference to address the constitutionality of the CFPB, said May 9 the CFPB’s constitutional status “is a threshold question that arises ahead of, and separate from, the merits.”

That raises the possibility of a lightning-fast end to the dispute. “If Ocwen’s proposed briefing plan is adopted, there is a prospect the case can be over immediately,” Ocwen told Judge Kenneth A. Marra in its May 9 filing.

Fight Over Conference

Ocwen and the CFPB have been arguing about Ocwen’s motion for a quick conference on the constitituional question since the case was filed.

The CFPB urged the court to deny that motion May 2, saying normal court procedures should govern the case, but Ocwen responded May 9, saying this case “is not a run-of-the-mill situation.” The Justice Department, in a separate case involving PHH Mortgage Corporation, has already said Dodd-Frank Act provisions that limit the president’s power to remove the CFPB director violate the U.S. Constitution.

The constitutional question should be tackled without delay, Ocwen said May 9. “The highest legal officer of the United States, the Attorney General, has concluded that the law establishing CFPB is in relevant part unconstitutional,” Ocwen’s filing said. “Under this extraordinary circumstance, Ocwen believes it would be productive and, indeed, important to have a discussion among the Court and the parties about how best to timely address the impact of CFPB’s unconstitutionality on the very viability of this case.”

PHH Case Highlighted

Ocwen’s case highlights the ongoing importance of the PHH case, which is scheduled for argument May 24 before the full U.S. Court of Appeals for the District of Columbia Circuit. In an October decision, two judges on a three-judge D.C. Circuit panel ruled against the CFPB, agreeing with PHH that the Dodd-Frank Act unconstitutionally limits removal of the CFPB director.

It’s that ruling that has made the Justice Department a potential factor in the Ocwen case, although it’s not yet involved in the matter. In December, the Justice Department lent its support to the CFPB’s petition for full D.C. Circuit review of the October ruling. In its December filing, the Justice Department said the CFPB’s petition should be granted, saying the October ruling was “at odds” with relevant U.S. Supreme Court precedent.

However, in March, the Justice Department took a different view, supporting PHH in the case and saying the Dodd-Frank Act’s removal restriction “is an unwarranted limitation on the President’s executive power.”

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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