CFPB appeals court ruling with potential to limit agency power

The Consumer Financial Protection Bureau formally appealed an October court ruling in the case of PHH v CFPB, where a mortgage originator was fined $109 million over what the bureau said amounted to a kickback scheme. In its filing, the CFPB said the ruling “purports to override Congress’s explicit determination to create ‘an independent bureau’ to exercise regulatory and law enforcement authority in a particular segment of the economy.”

The CFPB based its fine to the mortgage originator on a new interpretation of the Real Estate Settlement Procedures Act, known as RESPA, which was substantially different from previous interpretations made by the Department of Housing and Urban Development. PHH argued in its legal challenge that the CFPB had no business applying a new interpretation of an existing law retroactively, and the lower court agreed.

But PHH also argued that the CFPB could not make any interpretations of RESPA because the agency’s director could not be fired by the U.S. president but for cause. The single-director structure for an independent agency vests an unconstitutionally large amount of power outside of the president’s direct control, PHH claimed. The D.C. Circuit agreed with that argument as well, deciding simply to strike the “for cause” clause, effectively nullifying the CFPB’s independent status by allowing the president to remove the director for any reason.

For details, read CU Journal.