The CFPB Is Constitutional…For Now

February 1, 2018 at 8:59 am 4 comments

Oh well, it’s on to the Supreme Court hopefully.

Yesterday the Court of Appeals for the District of Columbia put the dreams of constitutional extremists like myself on hold when it ruled that the single director structure of the CFPB was constitutional. The decision means that the Director can still only be removed for cause by the President.

But the decision by an “en banc panel” of the Court was by no means a complete victory for the Bureau. The panel effectively held that former Director Cordray overstepped his powers when he increased from $6 Million to $109 Million, a fine imposed on PHH for violating RESPA. It was this excessive fine which triggered the litigation in the first place.

Let’s take a trip down memory lane. PHH, like many large lenders, owns a captive mortgage insurance company. In 2014, the CFPB brought charges against PHH and its captive reinsurer, Atrium. It claimed that the money transferred to PHH through Atrium violated RESPA because a company was not being paid for services being performed or was being paid in amounts that “grossly exceeded” the value of its services. Ultimately PHH contested this finding in an administrative law proceeding and it was this finding and Director Cordray’s fine which triggered this litigation.

What happens now? We will have to wait and see if either side feels that the remaining issues are worthy of the Supreme Court’s review. PHH has secured an important victory and may not feel that it ultimately has a dog in the fight now that the initial penalty has been addressed.

Personally, this is one issue that I sure do hope ends up before the Supreme Court. At some point the court has to reexamine its precedence. In my ever so humble opinion, the constitution was never intended to permit an explosion of independent quasi law making entities which are neither answerable to Congress or the Presidency.

Incidentally the CFPB also released a request for information yesterday in which it signaled that it is considering scaling back the use of administrative adjudications to resolve enforcement disputes. For example, it wants stake holders to discuss the positive and negative aspects of the Bureau’s administrative adjudication processes, including whether a policy of proceeding in Federal court in all instances would be preferable.

Yellen’s Term Comes To An End

Janet Yellen’s term as the first woman to head the Federal Reserve Board came to an end yesterday. Here is the latest statement of the Fed’s Open Market Committee. Incidentally, Yellen is the first Fed Chairman in forty years not to be reappointed to a second term.

Entry filed under: Legal Watch. Tags: , , .

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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