February 3, 2017

Uncertain Future? Parties Intervene in PHH Corp. v. CFPB

4 min

In October 2016, a three-judge panel of the D.C. Circuit decided PHH Corp. v. CFPB, which was on appeal from Director Cordray's order in an administrative adjudication (discussed further here). The D.C. Circuit essentially decided three issues:

  1. Constitutionality of the CFPB's structure;
  2. Scope of the Real Estate Settlement Procedures Act (RESPA) Section 8(c)(2) safe harbor; and
  3. Applicability of the RESPA three-year statute of limitations to the CFPB pursuing an enforcement action through administrative adjudication.

The court ruled against the CFPB on all three issues. In response, the CFPB filed a petition for rehearing en banc, seeking review of the first two issues. A majority of the active circuit judges on the court is needed to order a rehearing. If granted, the petition would result in a review of the three-judge panel's decision by the full D.C. Circuit.

PHH opposes the petition. The D.C. Circuit invited the U.S. Solicitor General (representing the United States) to file a response to the petition as well, which the Solicitor General filed on December 22, 2016. The United States supports the petition, although its position is not identical to the CFPB's.

In the last two weeks, several parties have moved to intervene in the case in support of the CFPB's petition.

Reactions to Uncertainty: Parties Unsuccessfully Seek To Intervene in PHH Corp. v. CFPB

In a one page per curiam order, the PHH panel of the D.C. Circuit denied several motions by parties seeking to intervene in the appeal. The parties seeking leave to intervene included:

State AGs: Seventeen state attorneys general have filed a motion to intervene in the case – citing the need to protect states' ability to bring actions under the CFPA. To justify their intervention in the case, the state AGs cite a "significant probability" that the new administration may take steps to cause the CFPB to cease defending the case. The concern forwarded by the state AGs is that the CFPB may hold veto power over state enforcement of the Dodd-Frank Act (through 12 U.S.C. § 5542, which provides jurisdiction under the CFPA, but requires a state AG to notify the CFPB when the AG proceeds under the CFPA, and allows the CFPB to intervene as a party). The state AGs argue that such veto power, coupled with the ability of the president to remove the CFPB Director at will, will impair the state AGs' ability to enforce the laws and protect the interests of state citizens.

Congressional Democrats: Senator Sherrod Brown (D-Ohio) and Representative Maxine Waters (D-Calif.) also have sought to intervene in PHH. Similar to the state AG filing, Brown and Waters cite concerns that the new administration will not adequately defend the case. They also highlight the fact that the CFPB cannot, on its own, petition the Supreme Court for review of the D.C. Circuit's decision (the CFPB may represent itself before the Supreme Court, but must notify the attorney general, who could prohibit the CFPB from filing a petition for a writ of certiorari).

Consumer Advocacy Groups: Several consumer advocacy groups, a credit union, and Maeve Brown, chair of the CFPB's Consumer Advisory Board, also filed a motion to intervene. The movants cite various interests tied to the independent agency status of the CFPB, its director, and its regulations and enforcement activity.

Next Steps

The Solicitor General (and the now-denied motions to intervene) is exclusively interested in the constitutionality of the CFPB's structure, its status as an independent agency, and the single directorship. The focus on the constitutional issues could well occlude the substantive RESPA question – or highlight the importance of the Section 8(c) question (after all, Judge Henderson, concurring in part and dissenting in part in PHH, pointed out that PHH's requested relief did not necessarily require the court to address the constitutional question).

Should the D.C. Circuit deny the CFPB's petition for review, the Bureau would have 90 days in which to file a petition for a writ of certiorari, in an attempt to obtain Supreme Court review. Any petition would require the approval of the Attorney General.