PHH gives up challenge to CFPB constitutionality

Will not pursue case to Supreme Court

The Court of Appeals for the District of Columbia Circuit’s stunning decision to reverse its earlier ruling and uphold the constitutionality of the Consumer Financial Protection Bureau will stand as the law of the land after PHH Corp. elected not to pursue the case to the Supreme Court.

According to multiple outlets, the deadline to appeal the case to the Supreme Court came and went this week without PHH filing an appeal.

PHH confirmed to HousingWire that it chose to let the May 1 deadline pass and did not file an appeal with the Supreme Court.

The Supreme Court was left as PHH’s only outlet to its challenge to the constitutionality of the CFPB after the full Court of Appeals reversed its previous decision and ruled the CFPB’s leadership structure constitutional.

The decision revoked the court’s October 2016 decision, which declared the CFPB’s leadership structure unconstitutional by a 2-1 vote and vacated a $100 million fine levied by the CFPB against PHH.

The court’s earlier decision declared the leadership structure of the CFPB to be unconstitutional, ruling that CFPB’s current structure allows the director to wield more power than the head of any other government agency.

“Because the Director alone heads the agency without Presidential supervision, and in light of the CFPB’s broad authority over the U.S. economy, the Director enjoys significantly more unilateral power than any single member of any other independent agency,” the court wrote in its October 2016 decision.

The case began with former CFPB Director Richard Cordray adding a $103 million increase onto a $6 million fine initially levied against PHH for allegedly illegally referring consumers to mortgage insurers in exchange for kickbacks.

PHH fought the fine, arguing that Cordray did not have the authority to increase the fine. The case eventually made its way to the Court of Appeals, which ruled in 2016 that the CFPB’s leadership structure was unconstitutional and vacated the additional $103 million fine.

The CFPB fought the ruling, asking the court to rehear the case en banc, meaning that it wanted the entire court to hear the case, which the court agreed to do back in February 2017.

The court’s previous ruling in the CFPB-PHH case also made the director of the agency removable at will. Under the CFPB’s current structure, the director serves a five-year term and may only be terminated by the president for “inefficiency, neglect of duty, or malfeasance in office.”

Last year, the government began to indicate that it might be switching sides in the battle between the CFPB and PHH, signaling that the Trump administration would not be as supportive of the CFPB as the Obama administration had been.

And indeed that’s what happened, as the Department of Justice filed an amicus brief in March 2017, asking the court to rule the CFPB’s leadership structure unconstitutional and grant President Donald Trump the authority to fire the CFPB director at will.

But the full Court of Appeals ruled that the CFPB is constitutionally structured and that the director is removable only for cause. The Court of Appeals also vacated the $100+ million fine against PHH for the supposed violations of the Real Estate Settlement Procedures Act.

With a partial victory in hand, the en banc ruling meant that PHH’s next step in its constitutional challenge would be the Supreme Court, if it so chose. But the deadline to petition the Supreme Court was earlier this week, and PHH chose to let the deadline pass without filing an appeal.

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