Yesterday, the United States Court of Appeals for the District of Columbia Circuit heard oral arguments in a case that could dramatically impact the future of the Consumer Financial Protection Bureau (CFPB). The case is PHH Corp. v. Consumer Financial Protection Bureau, United States Court of Appeals, D.C. Cir., Case No. 15-cv-01177. 


insideARM has published numerous articles about the case. PHH, a mortgage company in Mount Laurel, N.J., wanted the U.S. Court of Appeals for the District of Columbia Circuit to vacate a June 2015 enforcement ruling by the CFPB that said PHH violated anti-kickback provisions in Section 8(a) of the Real Estate Settlement Procedures Act (RESPA) and had to give up $109 million in what CFPB Director Cordray had said were ill-gotten mortgage reinsurance premiums. 

Our April 19, 2016 article described the case and the arguments presented.

Our October 11, 2016 article covered the original decision in the Court of Appeals. Among other issues, the case called into question the CFPB’s structure and authority.

On October 12, 2016 we published an article by Kelly Knepper-Stephens that discussed the potential impact the decision could have on the CFPB’s enforcement powers.    

In November, the CFPB filed a petition with the D.C. Circuit asking it to grant a rehearing en banc of its decision.

On January 4, 2017 insideARM published an excellent article by Barbara Mishkin from the Ballard Spahr LLP law firm that described the flurry of legal activity that occurred after the CFPB filed its petition for rehearing en banc. 

On February 16, 2017 insideARM wrote about the D.C. circuit granting the request for rehearing. 

Since the change in administration the “players” in this saga have changed. The CFPB is taking one position. Obviously, PHH is taking the opposite position. But the new player is the Department of Justice (DOJ). Under the Trump administration DOJ is now siding with PHH and taking the position opposite to the CFPB. See the insideARM March 22, 2017 article on the DOJ position. 

The Oral Arguments 

The arguments presented to the full 11-judge panel centered around whether the CFPB’s independent, single-director structure runs afoul of the Constitution. To listen to the complete hearing, click here. The court allocates specific time limits to the parties. PHH was allocated 30 minutes. The DOJ was allocated 10 minutes. The CFPB was allocated 30 minutes. 

PHH, was represented by Gibson, Dunn & Crutcher partner Theodore Olson. Mr. Olson spoke first. Olson sought to distinguish the CFPB from other federal commissions. As is often the case with appellate arguments, Mr. Olson was not allowed to stay “on script” for long. The judges immediately began peppering him with questions. Olson argued the biggest problem with the CFPB structure is that the CFPB’s power is vested in one person as opposed to being distributed among several people as in agencies such as the Federal Trade Commission (FTC). 

Attorney Hashim M. Mooppan represented the Department of Justice (DOJ). He spoke next. Moopan was immediately questioned by the judges regarding the difference in impact on executive power between a multi-member commission and a single director agency. He was specifically asked if/how the CFPB single director structure differs from the Social Security Administration (SSA), where the single head of that agency “controls 24% of the national budget and probably ½ to ¾ of the population.”  Mr. Mooppan was never permitted to answer that question before other judges asked additional questions. 

Mooppan was also asked about the CFPB exemption from the appropriation/budget process. But, he responded by saying that “in terms of the Article II analysis they (DOJ) are not relying on the exemption from the budgetary process. Despite the 10 minutes originally allocated to the DOJ, the judges asked Mr. Moopan so many questions that his portion of the argument took over 25 minutes of the court’s time.

The CFPB was represented by CFPB attorney Lawrence Demille-Wagman. He began his argument by stating that the CFPB position is that after the expiration of the Director’s 5-year term the Director could hold over until a new Director is appointed. But, he noted that Director Cordray would lose his “for cause” protection after his term expires. 

Questions directed to Demille-Wagman focused on the lack of the ability of a new President to appoint a new director for the CFPB when the President typically appoints other commission chairpersons immediately after the start of a new administration.  

It is difficult to predict where the judges stand by simply listening to their questions. However, the questions suggested that there is a split of opinions in the full panel. Two words best described the hearing: Mixed Messages. 

insideARM will continue to monitor this case. A decision from the court is not expected for several months.



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Tags: CFPB