PHH Says Supreme Court Ruling Helps Case Against CFPB

By Chris Bruce

June 24 — PHH Corp. says a U.S. Supreme Court ruling this week bolsters its appeal from a Consumer Financial Protection Bureau enforcement decision ( PHH Corp. v. Cons. Fin. Protection Bureau, D.C. Cir., No. 15-cv-01177, brief filed 6/23/16 ).

PHH, a New Jersey mortgage company, has appealed a June 2015 decision by CFPB Director Richard Cordray that ordered PHH to give up $109 million in payments that Cordray said were tied to violations of the Real Estate Settlement Procedures Act (RESPA).

The case is an important test of the CFPB's enforcement authority, and its ability to apply a reading of RESPA that PHH says is contrary to previous interpretation and practice.

In a June 23 letter to the U.S. District Court of Appeals for the District of Columbia Circuit, PHH said the Supreme Court's June 20 opinion in Encino Motorcars, LLC v. Navarro supports its position that Cordray's interpretation of RESPA doesn't merit deference from the court under the Supreme Court's 1984 ruling in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).

According to PHH, Encino, which involved a Labor Department determination, confirms that agencies must give serious weight to existing interpretations of federal law, even those announced in an informal manner.

Encino therefore reaffirms that the Director’s interpretation is arbitrary and capricious and `receives no Chevron deference,' ” PHH counsel Ted Olson of Gibson Dunn & Crutcher said in the letter.

High-Stakes Case

The D.C. Circuit heard argument in the case in April, with observers saying the CFPB faced hostile questioning from the D.C. Circuit panel (71 BBD, 4/13/16).

Interpretation of RESPA is a major factor in the case, but not the only one. Also at stake is whether CFPB administrative actions under RESPA are subject to RESPA's three-year statute of limitations.

Although everyone agrees the limitations statute applies when the CFPB brings a claim in court, the CFPB says the Dodd-Frank Act placed no such constraint on administrative actions.

In addition, PHH says the CFPB's governing structure is unconstitutional, saying the Dodd-Frank Act wrongly vested too much power in the hands of a single director.

Although the D.C. Circuit is expected to decide the case before the end of 2016, few expect the case to end there, no matter how the court rules.

The high stakes and the sharpness and novelty of questions presented by the case virtually guarantee further appellate action, they say.

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

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

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