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.
MetLife
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.”