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policymaking through litigation
and enforcement, and regulated
actors-like those who make up ACA's
membership-should not learn that the
ground rules have changed only when
they are facing an enforcement action
that the bureau has brought.
The PHH Corp. case represents the first
serious challenge to the constitutionality
of the bureau's structure and the first-ever
challenge to the CFPB's exercise of its
administrative enforcement powers.
The battle between PHH and the CFPB
stems from a massive $100 million penalty.
In early 2014, the CFPB issued a notice of
charges alleging that PHH initiated a kickback
scheme, in which PHH gave referrals for
mortgage insurance in exchange for mortgage
reinsurance contracts with its subsidiary.
An administrative law judge ordered a $6.4
million disgorgement penalty against PHH.
That decision was affirmed on appeal in
June 2015 when CFPB Director Richard
Cordray concluded that PHH engaged in
illegal kickbacks in violation of the Real Estate
Settlement Procedures Act. He increased the
initial penalty to $109 million.
Not persuaded by the requirement that it first
pass through Cordray's office before exercising
its right to judicial review nor the dramatic
increase in the fine that resulted, PHH appealed
to the D.C. Circuit Court. On Oct. 11, 2016, a
three-judge panel of the court ruled that the
CFPB's structure was constitutionally flawed and
that its director should be removable at the will
of the president.
The CFPB fought that ruling, and asked
the entire D.C. Circuit to hear the case rather
than just the three judges who previously
ruled. On Feb. 16, 2017, the appellate court
granted the CFPB's request for rehearing.
In doing so, the court ordered the panel's
October 2016 decision vacated, giving the
CFPB another shot at defending its singledirector structure.
Briefing in the case is scheduled to
conclude by April 10, and the D.C. Circuit is
scheduled to hear oral argument on May 24.
ACA will continue to follow the PHH
Corp. case and will keep its members posted
on any additional new developments.
If you want to read more about the
most recent significant judicial and
CFPB decisions involving the credit
and collection industry, ACA members
can always find concise case summaries
Karen Scheibe Eliason is ACA International's