Consumer Finance

Rehearing Of PHH Vs. CFPB Looms As Trump Admin To Join PHH Argument

In the latest salvo in the legal wrangling between the Trump administration and the Consumer Financial Protection Bureau (CFPB), the Justice Department has signaled that it will embrace the argument laid out by PHH Corp. that the CFPB is unconstitutional.

As noted by CFPBMonitor.com and disclosed in a court filing with the U.S. Court of Appeals for the District of Columbia Circuit, the Justice Department signaled that it will file a “friend of the court” briefing by Mar. 17, and this action portend further legal consideration over the CFPB’s structure and reach.

As has been previously reported, key among several issues related to the dispute is whether Richard Cordray’s position as director is one that will remain in place or other executive structures, such as a panel structure, should be created and just how the agency might be influenced directly by presidential power.

In its filing last week with the court of appeals, the Justice Department stated that “the views of the United States on matters involving the president’s removal power are not always entirely congruent with the views of independent agencies.”

The latest filing is a step meant to bring the question of constitutionality back into sharp focus. The D.C. Circuit court last month handed down a decision that vacated a previous panel ruling that in fact found the CFPB unconstitutional. The arguments focus in part on whether the current CFPB structure as an agency with a single director at its helm is in fact consistent with Article II of the Constitution (Cordray’s five-year term continues, at present, and has an expiry in 2018).

The debate continues as judges have said they will hear the CFPB’s appeals over whether the head of any independent agency — and not just the CFPB — does in fact serve at the directive of the president and can be fired by the president. In terms of next steps, the CFPB is to file responses to the Justice Department’s assertions and to file amicus briefs with the court by the end of the month.

Oral arguments are slated for May 24.

The latest filings come nearly three years after the CFPB set forth an action against PHH, with the charge that the latter violated real estate laws, as the company would refer customers to insurers who bought reinsurance from PHH units. A $109 million was issued against the lender, setting off a series of appeals. PHH for its part challenged the very constitutionality of the CFPB structure, based in part on a structure (still current) that has a single director who can be fired only for cause.

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