The Wall Street Journal has reported that PHH Corp. has decided not to appeal its case against the Consumer Financial Protection Bureau (CFPB, or BCFP).


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. Among other issues, the case called into question the CFPB’s structure and authority.

In October 2016 a three-judge appeals court panel agreed with PHH and ruled the CFPB structure, which provided its Director with a five-year term in office, subject to removal by the President only for “inefficiency, neglect of duty, or malfeasance in office,” unconstitutional.

In November 2016 the CFPB petitioned the Court for an “en banc” (full court) hearing to reconsider the decision. A flurry of motions, responses, and amicus briefs were filed. In February 2017, the Court granted the CFPB’s petition. Again, briefs were filed... including one from the now-Trump-led Department of Justice, in support of the PHH position (opposing the CFPB). Oral arguments were heard in May 2017. And then, nothing. While the CFPB’s world changed.

In November 2017, CFPB director Richard Cordray stepped down to run for Governor of Ohio. On his way out, he named his chief of staff, Leandra English, deputy director, with the expectation that she would be the de facto leader of the Bureau until a replacement was named by President Trump and confirmed by the Senate.

It didn’t go that way. Trump named his own acting director, Mick Mulvaney. Which led to the case of Leandra English v. Donald J. Trump et al. in the United States District Court for the District of Columbia. English was rebuked twice by the court, and then in January 2018 appealed her case to the U.S. District Court for the District of Columbia; the same court hearing the PHH case. She has asked for the case to be expedited. As of today there is no ruling. (This article provides additional background on the English case.)

Meanwhile, on January 31, 2018 the long-awaited en banc full court decision from the D.C. Court of Appeals arrived. In a ruling that surprised many, the court voted to overturn the 2016 three-judge decision which said that the CFPB’s structure was unconstitutional. This put PHH Corp. back at the beginning, considering its next move. Sort of. In addition to ruling the CFPB’s structure constitutional, the appeals court invalidated the hefty $109 million fine imposed by the CFPB under Director Cordray.

The final chapter

Which brings us back to the decision by PHH not to appeal its case to the U.S. Supreme Court. The Wall Street Journal article says neither the company nor the CFPB would comment for the story.

insideARM Perspective

It’s not hard to imagine why PHH would let the case go at this point. It’s likely their major issue was the fine, and with Acting Director Mulvaney now at the helm of the CFPB, I suspect they like their chances as the fine is reconsidered.

As I said back in January, the list of ironies of the changing positions and motivations related to this case is long.

When the case began in 2015, Democrats supported the single director fireable only for cause structure, saying it removed politics from the direction of the CFPB. But that was when Cordray still had several years left in his term, and many expected a Democrat to succeed Obama in the White House.

Conservatives in 2015 said the only appropriate structure for accountability must be a bi-partisan commission. But that was also when Cordray still had several years left in his term, and many expected a Democrat to succeed Obama in the White House.

The decisions in this case leave the power to re-shape the goals and actions of the CFPB in the hands of those who wanted to see the single-director structure deemed unconstitutional. 

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Tags: CFPB