CFPB Officials Recommend Dismissal Of PHH Case

After PHH Corp.’s appeal of a $109 million penalty caused a legal battle over the constitutionality of the Consumer Financial Protection Bureau’s (CFPB) structure, agency officials are recommending that Director Mick Mulvaney dismiss the company’s case, American Banker reported.

“Enforcement counsel and respondents have conferred, and have agreed to recommend dismissal of this administrative proceeding,” CFPB’s enforcement director, Kristen Donoghue, and a team of CFPB attorneys said in a joint statement. “Accordingly, enforcement counsel and respondents respectfully request that the acting director proceed to dismiss this matter.”

At the beginning of May, Mulvaney had sent questions to both sides in the case. But Donoghue contends in a legal filing that his questions about the matter “are now moot.” The news comes as PHH decided not to appeal its case. According to American Banker in May, that decision ended a contentious four-year legal battle.

Back in 2014, an administrative law judge ruled that PHH’s reinsurance agreements violated the Real Estate Settlement Procedures Act (REPSA)’s ban on kickbacks for referrals. The company was ordered to pay more than $6 million. However, former CFPB director Richard Cordray overruled that decision the following year, ordering PHH to pay $109 million. PHH responded with a lawsuit, alleging that CFPB was an unconstitutional agency. In January, the U.S. Court of Appeals for the D.C. Circuit dismissed the CFPB’s fine, but ruled against PHH’s claim that the agency’s single-director structure is unconstitutional.

But PHH had decided not to file a “petition for cert” by the May 1 deadline to appeal the case to the Supreme Court, said Dico Akseraylian, a PHH spokesman. And while other lawsuits question the constitutionality of the independent agency, PHH is the only party that could appeal the ruling on constitutional grounds, lawyers said.

The appeals court that ruled in favor of PHH regarding the fine found that Cordray had erred in reinterpreting RESPA. It also ruled that the CFPB had violated due process by not providing PHH with notice of its new interpretation.