Appeals Court Agrees To Hear CFPB/PHH Case

The Consumer Financial Protection Bureau scored a victory when a federal appeals court on Thursday (Feb. 16) agreed to throw out a ruling that found the government watchdog is unconstitutional.

According to a report by American Banker, the federal appeals court said it would revisit the issue during a hearing on May 24. The U.S. Court of Appeals for the D.C. Circuit agreed to consider the CFBP’s argument and will let 10 judges relook at the decision made by a three-judge panel last year. That ruling found the CFPB’s single director makeup wasn’t in line with the constitution and ruled against the provision in the Dodd-Frank Act that the director of the CFPB could only be fired if cause was found. While the CFPB scored a legal victory, the American Banker report noted it now has to convince a majority of the 10 judges that Dodd-Frank does indeed provide the proper checks and balances for the CFPB.

The court also wants PHH Corp., which launched the lawsuit, and the CFPB to say whether or not the single-director structure is in line with the constitution and why or why not; does the court need to address constitutionality; and what happens if the court rules the law judge who originally decided the case is an “inferior officer” instead of an “employee” of the CFPB, American Banker reported.

The appeals proceedings stem from a case against PHH, the New Jersey mortgage lender. Cameron Elliot, an administrative law judge who worked for the Securities and Exchange Commission, ruled PHH’s reinsurance agreements violated rules on kickbacks in exchange for referrals and ordered it to pay more than $6 million in damages. CFPB Director Richard Cordray overruled that and fined PHH $109 million after expanding the inquiry to 2008, which the report noted is beyond the statute of limitations.


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