Removing Barriers Blog

Recent Lawsuits Show Resistance to Dodd-Frank Act
Posted April 05, 2016 by CUNA Advocacy

Federal Courts in the District of Columbia are continuing to hear Dodd-Frank Act related litigation, and we are closely following these lawsuits. Two such cases could create important precedents for those under the jurisdiction of the Dodd-Frank Act, and those looking to challenge it.

PHH Corp.

The U.S. Court of Appeals for the District of Columbia will hear oral arguments on April 12, in mortgage company PHH Corp.’s challenge to CFPB Director Richard Cordray’s $109 million enforcement action, which ruled that the company took kickbacks in violation of the Real Estate Settlement Procedures Act (RESPA).

This case is the first challenge to a CFPB administrative action. When this case was first decided by an Administrative Law Judge, PHH Corp. was handed a $6 million fine. But after pushing back against the decision, Director Cordray increased the fee by 18 times, to $109 million.

On Monday, American Banker reported that two appeals court judges raised constitutional questions about the structure of the CFPB, especially focusing on its leadership by a single director. The article noted that judges in the U.S. Court of Appeals for the District of Columbia said that lawyers involved in the case should be prepared to answer several constitutional questions at the next hearing, including: "What independent agencies now or historically have been headed by a single person?"

The judges also asked: "If an independent agency headed by a single person violates Article II [of the Constitution] … what would the appropriate remedy be?"

The judges’ questions seem to indicate that the court may be considering whether there is a valid constitutional challenge to the structure of the CFPB.

We will continue to follow this case and the upcoming oral arguments.


Last month, insurance giant MetLife Inc. won a challenge to its nonbank “systemically important financial institution” (SIFI) designation by the US Financial Stability Oversight Council (FSOC), which is an office within the Treasury Department. Large nonbanks can receive such designations if the FSOC determines these companies could pose threats to the financial stability of the United States. Such a designation gives the Federal Reserve Board supervisory and regulatory powers over the consolidated institution. The full ruling in this case remains under seal, but the court issued a one-page ruling denying FSOC’s request to dismiss the case, and a judgement in favor of MetLife.

According to the Wall Street Journal, “Judge Rosemary Collyer did more than hand MetLife Inc. a victory in its battle to fend off stricter federal oversight. Her decision on Wednesday helps strengthen a mounting backlash to the regime of post-financial-crisis regulations, emboldening critics who say the rules are doing more harm than good. This isn’t the first setback for the Obama-era financial overhaul, but, if sustained through a likely appeal, it might be the biggest.”