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CUNA was present today as oral arguments took place in the U.S. Court of Appeals for the District of Columbia Circuit in the PHH Corp. v. CFPB case. At issue, among other questions was the constitutionality of the CFPB with its independent director appointed for a five-year term and only removable by the President “for cause”. The original three-judge panel opinion removed the “for cause” requirement declaring the structure unconstitutional. Additionally, other major parts of the prior ruling were that the CFPB must abide by statute of limitations under the Real Estate Settlement Procedures Act (RESPA); PHH is allowed to have captive reinsurance arrangements so long as the amount paid by the mortgage insurer for the reinsurance does not exceed the reasonable market value of the reinsurance; and CFPB departed from the consistent prior interpretations issued by the Department of Housing and Urban Development and then retroactively applied its new interpretation of the Act against PHH, thereby violating PHH’s due process rights.
Today’s hearing was a rehearing en banc by the full panel of judges including the three, who previously decided the original ruling. An en banc review is usually undertaken only for important cases coming before the court. The questions the parties were directed to address included:
1. Is the CFPB's structure as a single-Director independent agency consistent with Article II of the Constitution and, if not, is the proper remedy to sever the for-cause provision of the statute?
2. May the court appropriately avoid deciding that constitutional question given the panel's ruling on the statutory issues in this case?
3. If the en banc court, which has today separately ordered en banc consideration of Lucia v. SEC, 832 F.3d 277 (D.C. Cir. 2016), concludes in that case that the administrative law judge who handled that case was an inferior officer rather than an employee, what is the appropriate disposition of this case?
Arguments included counsel for petitioners PHH, counsel for the Department of Justice (on the side of PHH arguing the agency is unconstitutional), and counsel for respondent’s CFPB. The majority of the questions centered around the structure of the CFPB, distinguishing it from other independent agencies (Federal Reserve, Social Security Administration, FTC, FCC, HUD, were mentioned numerous times) and the application of the law based on various court precedents.
Many of the questions focused on how far Congress could go in structuring an executive branch agency and the difference between an independent director, and that of a deliberative body or a commission or panel, as an agency head. There were only a few questions focused on the previous decision concerning the RESPA violation and the statute of limitations issues, suggesting that part of the ruling might stay intact, representing a victory for PHH. However, the court could take a different direction on those issues.
Without providing any predictions (as it is always dangerous to predict based on oral arguments), the Court struggled with the issue of how to deal with the constitutional issue and may very well leave it to the Supreme Court to decide, leaving the CFPB’s structure intact. They could uphold the earlier panel’s ruling, or even go further and strike the entire agency, although this seems unlikely. A ruling will likely take several months.
CUNA filed a joint Amicus Brief with several other trade associations in this matter in advance of the hearing. We will continue to monitor this case as it moves forward.
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