On November 18, 2016, the Consumer Financial Protection Bureau (CFPB) formally appealed the D.C. Circuit Court of Appeals panel decision that held the CFPB’s structure unconstitutional.
The appeal follows a decision by a three judge panel in October in PHH Corp. v. CFPB, in which the panel held that the CFPB’s single director structure is unconstitutional. The underlying case involved PHH, a mortgage originator, that was fined $109 million by the CFPB in an administrative enforcement action for an alleged reinsurance kickback scheme that violated the Real Estate Settlement Procedures Act (RESPA). The CFPB based its fine on a new interpretation of RESPA and then retroactively applied the fine to PHH’s prior conduct.
PHH initially appealed the CFPB’s decision and fine to the D.C. Circuit Court of Appeals, which was heard by a three judge panel. PHH argued that the CFPB’s structure was unconstitutional and its interpretation and application of RESPA was improper. The panel found in favor for PHH. In holding that the CFPB’s structure is unconstitutional, the panel determined that the CFPB’s structure unconstitutionally infringed on the President’s authority, because it was headed by a single director who could only be removed by the President for cause. The panel also held that the CFPB’s interpretation of RESPA was improper and violated PHH’s due process rights. You can read more about the panel’s decision and the underlying facts of the case here.
The CFPB’s appeal seeks a review of the panel decision by the full D.C. Circuit Court of Appeals. In its petition for rehearing, the CFPB states that the panel’s decision “sets up what may be the most important separation-of-powers case in a generation.” The CFPB’s petition argues that the panel improperly concluded that the Bureau’s single headed structure is unconstitutional and not supported by the history of other executive agencies. In addition, the CFPB argues that the panel incorrectly interpreted RESPA and ignored case law that permitted the CFPB to retroactively apply its interpretation to PHH’s conduct.
You can view the CFPB’s petition for rehearing here.
It is widely believed that the CFPB’s petition will be granted by the D.C. Circuit, given the high profile nature of the case and the impact the panel’s ruling could have on the CFPB.
If the full D.C. Circuit upholds the panel decision then the CFPB could petition the US Supreme Court for review.