PHH Urges End to Consumer Financial Protection Bureau

By Chris Bruce

PHH Corp. March 10 asked a federal appeals court to order wholesale elimination of the Consumer Financial Protection Bureau in a case testing the agency’s constitutionality ( PHH Corp. v. Cons. Fin. Protection Bureau , D.C. Cir., 15-cv-01177, brief filed 3/10/17 ).

In October, a panel of the U.S. District Court for the District of Columbia severed Dodd-Frank Act provisions that limited the president’s power to remove the CFPB’s director. The full D.C. Circuit is now reviewing that ruling.

In its opening brief, PHH, a Mount Laurel, N.J.-based mortgage company, urged the court to again rule against the CFPB, but to go further. It said severance of the removal restrictions “is not an adequate or appropriate remedy because it would solve only one of the CFPB’s multiple structural problems while creating a new agency structure that Congress likely did not intend.”

“In light of the many constitutional problems that plague the CFPB’s structure, the appropriate remedy is to strike down the CFPB in its entirety,” the brief said, adding that the D.C. Circuit “should not permit any remand that would allow the CFPB to resume these invalid proceedings.”

Filing Sets Stage

The PHH brief sets the stage for the next major filing, a friend-of-the-court brief by the U.S. government that’s due by March 17. That brief will mark the Trump administration’s first formal involvement in the case.

The controversy stems from 2015, when the CFPB, in an administrative action, alleged violations of the Real Estate Settlement Procedures Act (RESPA) by PHH. An administrative judge ruled against PHH, which appealed the decision to Cordray. Cordray upheld the decision against the company while toughening its conclusions with a far-reaching interpretation of RESPA and an order for PHH to disgorge $109 million in allegedly ill-gotten profits.

PHH asked the D.C. Circuit to review that decision, and in October a three-judge panel rejected the CFPB’s reading of RESPA and said the agency violated the company’s due process rights. Two judges on the panel said the CFPB’s single-director leadership structure violates the U.S. Constitution. The full D.C. Circuit granted the CFPB’s request to scrutinize the panel decision in February.

In addition to calling for an end of the CFPB, PHH’s March 10 brief asked the D.C. Circuit not to revisit the panel’s ruling on the RESPA questions. The panel said the statute allows reasonable payments for services actually provided, and rejected the CFPB’s claims that RESPA’s statute of limitations doesn’t apply to administrative actions.

Industry Groups Seek Entry

In other action March 10, more than a dozen trade associations alerted the court that they also plan to submit a brief.

The filing by the American Bankers Association, the Financial Services Roundtable’s Housing Policy Council, the Mortgage Bankers Association, the National Association of Realtors, and others said the D.C. Circuit will be helped by an analysis of “how the Bureau’s Order not only contravenes RESPA’s statutory text, governing regulations, and applicable policy statements, but also how the Order’s violation of fair-notice principles disrupts the critically important home-lending market.”

PHH is represented by Theodore B. Olson, Helgi C. Walker, and Lucas C. Townsend of Gibson Dunn, Mitchel H. Kider, David M. Souders, and Sandra B. Vipond of Weiner Brodsky Kider, and Thomas M. Hefferon and William M. Jay of Goodwin Procter, all of Washington.

The trade groups are represented by Joseph R. Palmore, Donald C. Lampe, Bryan J. Leitch, and Michael J. Agoglia of Morrison Foerster in Washington and San Francisco.

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

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

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