PHH Walks Away From High Court Appeal On CFPB Constitutionality

PHH Corporation has decided not to appeal a case that questioned the constitutionality of the Consumer Financial Protection Bureau (CFPB).

According to American Banker, this ends 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’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.

PHH has 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 there are other lawsuits questioning 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 the Real Estate Settlement Procedures Act. It also ruled that the CFPB had violated due process by not providing PHH with notice of its new interpretation of Respa. In addition, the court stated that the CFPB is subject to the three-year statute of limitations in administrative cases.

The Trump administration has aimed to reduce the power of the CFPB. Just last week, acting director Mick Mulvaney urged executives in the banking industry to put pressure on lawmakers if they want to see their agendas realized.

He also said he wants to call the agency by its official name — the Bureau of Consumer Financial Protection — which is an effort to lower the public profile of the CFPB.

“I’m trying to get in the habit of now saying the ‘BCFP.’ It’s really, really hard to do that when you’ve said the CFPB for so long,” Mulvaney said during the presentation.