A federal appeals court has ruled in a closely followed case that the Consumer Financial Protection Bureau’s structure is constitutional.
The decision was handed down on Wednesday by the U.S. Court of Appeals for the District of Columbia Circuit for a petition for rehearing by PHH Corp.
The case first took shape in early 2014 when the CFPB accused the Mount Laurel, New Jersey-based firm and four subsidiaries of violating the Real Estate Settlement Procedures Act.
According to the regulator, hundreds of millions of dollars in kickbacks made to PHH through reinsurance arrangements violated RESPA.
An
administrative action filed by the bureau against PHH seeking a civil fine, restitution for victims and a permanent injunction to prevent future violations resulted in a November 2014 recommendation by an administrative law judge that PHH disgorge more than $6 million.
But that
wasn’t enough for the CFPB, so it reversed the decision in June 2015 and issued an order requiring PHH to pay $109 million.
PHH filed an appeal with the DC circuit challenging the constitutionality of the regulator’s structure.
In October 2016, a three-judge panel ruled that the CFPB is unconstitutionally structured. It also agreed with PHH that its captive reinsurance arrangements don’t violate RESPA as long as the amount paid by the mortgage insurer doesn’t exceed the reasonable market value of the reinsurance.
Then, in February 2017, the CFPB
filed a petition appealing to the full appeals court the three-judge panel’s initial decision.
On Wednesday, the appeals court issued a decision declaring the CFPB is constitutional. It cited a Supreme Court decision 80 years ago that found the Federal Trade Commission — which has powers
analogous to those of the CFPB — was constitutional.
“Applying binding Supreme Court precedent, we see no constitutional defect in the statute preventing the president from firing the CFPB director without cause,” the decision stated. “We thus uphold Congress’s choice.”
PHH, however, can challenge the $109 million fine.
“The panel opinion, insofar as it related to the interpretation of RESPA and its application to PHH and Atrium in this case, is accordingly reinstated as the decision of the three-judge panel on those questions,” the decision states.
The decision comes even as
CFPB Deputy Director Leandra English is challenging Mick Mulvaney, who President Donald J. Trump appointed acting director of the regulator, for the leadership power of the bureau until a permanent director is confirmed.
