Publication

"D.C. Circuit’s PHH Ruling Reins in CFPB"

On October 11, 2016, the U.S. Court of Appeals for the District of Columbia Circuit held in PHH Corporation v. Consumer Financial Protection Bureau, case no. 15-1177, that the CFPB’s structure of a single independent director, removable only for cause, violates the separation of powers provisions of Article II of the Constitution.  In addition, the Court unanimously (1) held that CFPB Director Richard Cordray’s prior order that the CFPB could enforce its new interpretation of the Real Estate Settlement Procedures Act (“RESPA”) violated PHH’s constitutional due process rights and (2) rejected the CFPB’s contention that it is not subject to any statute of limitations when bringing a RESPA enforcement action through the administrative adjudication process. 

The Court’s holdings are major setbacks for the CFPB, particularly its enforcement activities. The decision may temper the CFPB’s expansive view of its authority – recently emboldened following the publicity surrounding the Bureau’s and other authorities’ enforcement actions against Wells Fargo (with the lion’s share of credit given to the CFPB), as well as the CFPB’s summary judgment victory in its litigation against CashCall Inc. for servicing loans that were invalid under state laws.   The CFPB is likely to appeal the PHH ruling, either through seeking a rehearing en banc or directly filing a petition for a writ of certiorari with the Supreme Court.  Given the important constitutional questions presented, it is reasonable to expect that the Supreme Court will grant review.

This Stroock Special Bulletin provides an overview of the ruling and its potential impact on the structure of and future enforcement actions by the CFPB.