A major development affecting the Consumer Financial Protection Bureau was handed down this past Tuesday as three republican federal appeals court judges found against the regulatory organization in favor of PHH Corp, which has been battling the bureau over its mortgage insurance practices since 2014.
The case was predicated on the CFPB alleging PHH of referring consumers to preferred mortgage insurer partners and taking fees as kickbacks. The lawsuit was major news primarily because of the size of the CFPB’s fine on PHH Corp: $109 million, and also because it represented the first time that a company put under penalty by the CFPB fought back in response.
While the case was primarily about the illegality of PHH Corp taking reinsurance fees as kickbacks, in violation of the Real Estate Settlement Procedures Act (RESPA), the major news coming out of the decision was the court finding the structure of the CFPB unconstitutional and giving the President of the United States power to remove someone from the director position without cause. The CFPB was found to be an executive agency, similar to the Department of Justice and the Department of Treasury, which are also each headed by a single person.
Some have interpreted the court’s rulings as unsurprising and ultimately having little effect on the bureau. A change in removal authority of the director would not ultimately change the role or power of the director, or the bureau. In addition to this decision, the D.C. court also set a three-year statute of limitations when enforcing RESPA penalty violations.
This decision is expected to be appealed.