CFPB Seeks Rehearing in PHH Lawsuit

In a case brought against the CFPB by mortgage lender PHH Mortgage Corp., a federal appellate court in Washington last month ruled that the bureau’s structure gives Director Richard Cordray too much power and that the president should be able to fire the bureau’s director for any reason.

For now, the director can only be fired for cause.

If the ruling stands, it could allow Trump — who has said he plans to overhaul or dismantle the Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the CFPB — to fire Cordray soon after taking office. Cordray was appointed by President Obama, and his five-year term doesn’t end until mid-2018.

Attorneys for the CFPB called the ruling “dramatic and unprecedented,” arguing that the bureau’s current structure is sound. On Friday, they asked that the PHH case be reviewed by all judges in the D.C. Circuit Court of Appeals, rather than the three-judge panel that handed down last month’s ruling.

If the court agrees to hear the case and sides with the CFPB, it would allow Cordray, who has been pilloried as overly aggressive by Republican lawmakers and the financial industry, to continue running the agency until his term expires.

“The petition is extremely significant because Richard Cordray now might remain in charge of the CFPB when the new administration takes office,” said Scott Pearson, an attorney in the Los Angeles office of Ballard Spahr LLP who often works with clients facing CFPB scrutiny.

That could make it more difficult, and likely require legislation, to weaken the agency or undo some of the rules it has put in place over the past five years, said Pearson, who last week said he expected that Trump would fire Cordray within a week of taking office.

In a statement Friday afternoon, Sen. Sherrod Brown (D-Ohio), the ranking Democrat on the Senate Banking Committee, said the court should hear the case.