The long awaited en banc oral argument in the PHH v. CFPB appeal was heard this morning. Based upon the questions asked by the judges, and with the caveat that such questioning is not always an indicator of how a court will rule, it seems likely that the D.C. Circuit will not find the CFPB to be unconstitutionally structured. While Judge Kavanaugh, author of the roughly 100-page 3-judge panel decision last October, tried mightily to defend his position that a single director removable only for cause thwarts the President’s Article II authority, most of the judges did not seem to share his views. Some judges, like Judge Griffith, implied that the Court was bound by the Supreme Court’s decision in Humphrey’s Executor v. United States, which upheld the constitutionality of removal-for-cause provisions as pertains to the multi-member Federal Trade Commission. Other judges appeared to believe there was sufficient accountability for the CFPB Director because he or she can be removed for cause. Judge Pillard defended the independence of financial regulatory agencies such as the CFPB. On the whole, fewer judges seemed inclined to declare the for-cause provisions unconstitutional than to keep the status quo.

Notably, only about 60 seconds of the 90 minute oral argument addressed RESPA concerns, in particular Section 8(c)(2). The judges’ RESPA-related questions concerned whether the industry had notice that RESPA prohibited the conduct in question (which had been blessed by a 1997 Letter from HUD permitting captive reinsurance if the Section 8(c)(2) safe harbor provisions were met) and whether the CFPB was bound by RESPA’s 3-year statute of limitations. Questions about both issues were directed to CFPB counsel. He stated that the statute itself provided ample notice of its prohibitions in Sections 8(a) and 8(c)(2). He also said the Bureau was bound by the generally-applicable 5-year statute of limitations at least insofar as penalties are concerned, but he did not concede the Bureau was otherwise bound by RESPA’s limitations period in an administrative proceeding. That said, given how little attention was directed to the RESPA questions, it is likely that the full 11-member panel will affirm the 3-judge panel’s views on RESPA expressed last October.

It would appear that Director Cordray will remain at his desk until his term expires in July 2018. He may, however, need to revise his interpretation of Section 8(c)(2).