Nov. 19, 2016: CFPB to appeal PHH decision; MBA and other groups weigh in

(Editor’s note: Most of the time my Saturday commentaries come from readers themselves who comment on current events and trends. Today’s, however, was the result of the appeal late Friday by the CFPB of the PHH ruling. The ball is still in play!)


Yesterday the Consumer Financial Protection Bureau (CFPB) gave everyone something to ruminate on over the weekend when it requested that a federal court hear arguments again in a case that called into question whether the independent agency’s governing structure is constitutional. And so the CFPB is fighting back against a recent court ruling that found the structure of the agency is unconstitutional.


The court must agree to hear the case, but legal eagles are quick to point out that if the full D.C. Circuit agrees to hear the case the judgment of the three-judge panel from October is immediately vacated and has no legal effect. Thus, the CFPB would continue to be structured as is: as Congress voted in Dodd Frank and the CFPB Director would not be removable at will by the President.


The CFPB’s petition seeks the reconsideration of an October ruling from the U.S. Court of Appeals for the District of Columbia Circuit that gave the president the ability to fire the CFPB’s director. The majority opinion in PHH v. CFPB, written by Judge Brett Kavanaugh, said the agency would be better served by a regulatory commission structure, a major victory for conservative critics of the CFPB who say its single-director structure makes it unaccountable and subject to overstepping its authority.


The federal appeals court called for the CFPB to be restructured so that the director could be removed by the president at will. The decision, if unchallenged, meant that CFPB Director Richard Cordray could be replaced by president-elect Donald Trump before the end of his term, which expires in 2018. Or he could be replaced by President Obama, but that won’t happen.


Remember that a panel of three judges on the U.S. Court of Appeals for the District of Columbia circuit ruled in PHH Corp. vs. CFPB that the 2010 Dodd-Frank Act crafted the director’s position in a manner that consolidated too much power at the top. Judge Brett Kavanaugh, who authored the majority opinion, argued that the CFPB’s director has more power than virtually any other government official except for the president.


To remedy this, Kavanaugh ruled that the director must report to the president. The agency’s Republican opponents viewed the ruling as a victory for their efforts to overhaul the CFPB, and Democrats opined that the decision was a minor setback.


The CFPB said that the ruling would impact the five-year-old agency and could hurt operations at other single-director agencies like the Social Security Administration and Federal Housing Finance Agency.


“The underlying premise of the panel’s opinion is that, regardless of the number of individuals who head an agency, for-cause removal renders the agency ‘unaccountable to the President,’” CFPB attorneys wrote, referring to the three-judge panel that decided the PHH case. “So how did the panel conclude that an agency headed by a multi-member commission will nonetheless pass constitutional muster, whereas one headed by a single director will not? The panel’s answer had nothing to do with a lack of presidential accountability… (The case) may be the most important separation-of-powers case in a generation” because of its potential impact on independent regulatory agencies, the attorneys wrote.


Sen. Sherrod Brown of Ohio, the top Democrat on the Senate Banking Committee, observed, “The CFPB deserves a hearing before the full DC Circuit Court, which I believe will find the CFPB’s structure sound. The CFPB works — just look at its role in holding Wells Fargo accountable for customer abuses, which is just the latest example of the more than $11 billion it has returned to more than 27 million Americans hurt by illegal practices.” One could easily say that it wasn’t the CFPB that was at the root of the Wells Fargo scandal, but we’ll leave that one alone.


The CFPB’s petition yesterday based part of its argument because if left to stand, the decision would interfere with Congress’s ability to create independent agencies run by a single director. In the petition, the agency said the ruling could affect not only the CFPB but other independent agencies, pointing to the Social Security Administration, the Federal Housing Finance Agency (FHA), and the Office of Special Counsel.


David Stevens, President and CEO of the Mortgage Bankers Association, relayed, “”This appeal comes as no surprise as the bureau made clear there is more to come following the recent ruling. We expected that the next step would be an appeal to the full circuit court. The only alternative would have been the Supreme Court. The ruling of the full circuit court on both the RESPA issues and the broader questions about the CFPB’s structure will have significant implications going forward.”


So although the move was widely expected it provides further evidence that the CFPB is doing its best to continue with business as usual, despite having come into political crosshairs since the presidential election. While Trump has not talked in detail about how he would like to reform the CFPB, his transition team has said that he would like to repeal the Dodd-Frank Act that led to the creation of the agency.


Various consumer rights and advocacy groups were pleased by the appeal. “The CFPB’s filing is an important step in overturning the Court’s unprecedented and erroneous decision. CFPB continues to use its independent authority to protect consumers from Wall Street greed by regulating the financial industry. Over the last five years, the CFPB has provided nearly $12 billion in relief to 27 million consumers.


“In the case of PHH Corporation, CFPB Director Richard Cordray ordered a mortgage service company to pay $109 million in restitution for illegal kickbacks it gave to mortgage insurers. The move caused unassuming homeowners to pay additional, unnecessary expenses for home insurance. Major consumer and civil rights groups praised the CFPB’s decision to challenge the Court’s ruling and issued the following statements:


“’We need a strong and independent CFPB agency and director now more than ever. If the 2008 financial crisis showed us anything, it’s that people need an independent regulator to look after the interests of consumers. We’ve already seen conservative members of Congress attempt to weaken CFPB’s authority for meritless and political reasons. Director Cordray has led the Bureau with a steady hand and worked tirelessly with his staff to return billions of dollars back to hardworking people across the country harmed by abusive financial practices. The Center for Responsible Lending will continue to support the CFPB as the agency fights to maintain its independent structure so it can carry out its mission,’ said Mike Calhoun, President of the Center for Responsible Lending.  


“’Americans for Financial Reform applauds the CFPB for pressing forward to preserve its independence. We are hopeful that the full D.C. Circuit will protect the CFPB’s power to fulfill its consumer protection mission by overturning the unprecedented and erroneous 2-to-1 panel decision. A strong CFPB is essential to stopping Wall Street and predatory lenders from fleecing American consumers. Director Cordray has been a tireless and effective leader of the CFPB and should serve his full five-year term,’ said Lisa Donner, Executive Director of Americans for Financial Reform.


“’When Congress established the Consumer Financial Protection Bureau in response to the devastating financial crisis of 2008, it provided that the CFPB would have a single director removable only for cause because it believed that structure would enable the Bureau to fulfill its important role most effectively.  The D.C. Circuit’s conclusion that that structure is unconstitutional is fundamentally at odds with the text and history of the Constitution, not to mention long-standing Supreme Court precedent.  We are confident that the full D.C. Circuit will recognize that this case presents a question of “exceptional importance” and decide to rehear it,’” said Brianne Gorod, Chief Counsel, Constitutional Accountability Center.


“’We can’t afford to have the crucial work of the CFPB interrupted. Its current structure and leadership has helped save countless people across the country from abusive financial practices. The impact of unscrupulous and predatory financial services providers on the communities we serve and represent, which contributed immensely to the economic downturn of 2008, is well documented and continues to decimate our families and our neighborhoods. The NAACP remains committed to protecting the integrity of the Bureau and will continue to work to preserve its strength and its ability to carry out its vital mission,’ said Hilary O. Shelton, Director of the NAACP’s Washington Bureau and Senior Vice President for Policy and Advocacy.


“’Since the CFPB opened its doors five years ago, it has restored order to the financial marketplace, and consumers, in particular communities of color, overwhelmingly support its efforts to reign in abusive financial practices. Under the direction of Director Richard Cordray, the CFPB has delivered millions of dollars of relief to consumers and brought much-needed transparency to industries that sorely lacked it, including remittance transfers, credit cards, student loan servicing, and payday loans. The National Council of La Raza (NCLR) supports an independent Bureau that has all of the tools at its disposal to make financial markets more fair, transparent, and consumer-friendly,’ said Eric Rodriguez, Vice President of the Office of Research, Advocacy and Legislation at NCLR.


“’In the five years since it opened its doors, the Consumer Financial Protection Bureau has worked tirelessly to enforce the laws that went ignored in the run-up to the 2008 financial crisis, and has done more than any other federal agency to empower consumers against predatory, deceptive, and outright fraudulent behavior by bad actors in the financial industry. It is disappointing but not surprising that payday lenders, debt collectors, for-profit colleges, and other powerful industry groups have turned to their allies in Congress and the courts in an effort to weaken the Bureau so they can keep exploiting people of color and other financially vulnerable Americans,’ said Wade Henderson, president and CEO, The Leadership Conference on Civil and Human Rights.


Regardless of the court’s ruling, Trump and the Republican majorities in Congress could enact legislation turning the agency into a five-member, bipartisan regulatory commission.

If the en banc panel agrees to hear the case and rules in the CFPB’s favor, however, Cordray could remain in his current position until his term expires in 2018. That would give him more latitude to make decisions on enforcement and regulations independent of political considerations tied to the White House.


And as mentioned above, if the full D.C. Circuit agrees to hear the case, the judgment of the three-judge panel is immediately vacated and has no legal effect. Thus, the CFPB would continue to be structured as Congress intended and the CFPB Director would not be removable at will by the President.


If you’re around on Monday the 21st at 2PM ET, October Research, LLC and sponsor WFG National Title Insurance Co. are offering up, “How PHH Impacts Section 8.” “This webinar comes in the wake of the federal appellate decision in PHH v. CFPB and will provide attendees with an understanding of the court’s interpretation of RESPA. Sponsored by WFG National Title Insurance Co., the webinar features Phillip Schulman of Mayer Brown LLP and Charles Cain of WFG. The pair will join moderator Donald O’Neill of WFG in discussing the case and its impact on Section 8 compliance.



(Warning: Rated…something. I don’t know – maybe R for lack of morals.)

I was a very happy man. My wonderful girlfriend and I had been dating for a few years, and so we decided to get married. There was only one little thing bothering me…It was her beautiful younger sister.

My prospective sister-in-law was twenty-two, wore very tight miniskirts, and generally went bra-less. She would regularly bend down when she was near me, and I always got more than a nice view. It had to be deliberate. Because she never did it when she was near anyone else.

One day, ‘little sister’ called and asked me to come over to check the wedding invitations. She was alone when I arrived, and she whispered to me that she had feelings and desires for me that she couldn’t overcome. She told me that she wanted me just once before I got married and committed my life to her sister.

Well, I was in total shock, and couldn’t say a word.

She said, “I’m going upstairs to my bedroom, and if you want one last wild fling, just come up and get me.”

I was stunned and frozen in shock as I watched her go up the stairs. I stood there for a moment, then turned and made a beeline straight to the front door. I opened the door, and headed straight towards my car.

Lord… And behold, my entire future family was standing outside, all clapping!

With tears in his eyes, my future father-in-law hugged me and said, “We are very happy that you have passed our little test. We couldn’t ask for a better man for our daughter. Welcome to the family.”

And the moral of this story is:

Always keep your condoms in your car.


(Copyright 2016 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)


Rob Chrisman