Update on CFPB v. PHH After Oral Argument

The en banc (before the entire bench) D.C. Circuit Court heard oral arguments this week in the PHH case. While fortune-telling from oral arguments is a tricky business, there are a few things of interest:

1. We may not see changes to the CFPB anytime soon. While there were lengthy arguments on the constitution question, the majority of judges on the Court did not seem interested in finding the CFPB structure unconstitutional. Even if the Court decides to rule on constitutionality, it may only strike the “for cause” provision allowing the President to remove the Director at will and nothing more. Currently, the President may remove the Director only “for cause” which is consistent with Supreme Court precedent in Humphrey's Executor v. United States , 295 U.S. 602 (1935).
2. The Court seems favorable to PHH’s position on Section 8 of RESPA and the statute of limitation. The Bureau’s current position, in PHH, is that no statute of limitations applies to enforcement actions. It is likely the Court will reject CFPB’s RESPA interpretation confirming the anti-kickback provisions of RESPA Section 8(a) and that five-year limitation period, under 12 U.S.C. §2462, will apply to any Bureau fines or civil penalties from the start of the enforcement action. Such a ruling would be consistent with the mortgage and title industry’s long-standing understanding and reliance as to how to conduct business under RESPA.

PHH is the first time the CFPB has faced a contested action which has also gone through an administrative trial, appeal with the Director of the Bureau, and a full federal court review. It seems likely that the full D.C. Circuit will reinstate the RESPA holding and discussion of the panel in this matter, which will provide greater certainty for our industry.