PHH vs. CFPB: Who Won?

You gotta love a case where each party can claim victory!

The US Court of Appeals for the DC Circuit found that the CFPB’s structure was constitutionally valid even though the President could only fire the director for cause rather than “at will.”  So, consumer advocates can be pleased that the agency is continuing in existence, and the director is theoretically independent.  However, they are now stuck with a Trump appointee (when he gets around to it) that will carry over into the next presidential term.  Meanwhile, Mulvaney (interim director) is busy dismantling rules and procedures.  Even the tagline for the CFPB press releases has been changed to add the fact that the CFPB helps “markets work by regularly identifying and addressing outdated, unnecessary, or unduly burdensome regulations….”

PHH has to be pleased that the appellate court upheld part of the prior decision, which concluded that CFPB director Cordray’s decision-making violated due process.  The case involved a potential violation of the anti-kickback provisions of RESPA.  Cordray retroactively repealed HUD rulings—without going through the Administrative Procedures Act.  Plus, he basically nixed the idea of a statute of limitations for the alleged violation.  The original opinion on this point is a great primer on US Supreme Court decisions on overreach and violation of due process by agencies.  So, industry wins big on this issue.

Now, it will be intriguing to see whether this latter issue (violation of due process) can translate into an effective defense in other cases where regulators “write” rules through the examination and enforcement process!

Karen Neeley
Kennedy Sutherland LLP