The attorney who represented PHH Corp. in its lawsuit against the Consumer Financial Protection Bureau talked about the implications from last week’s appellate court decision.
Last week, the
U.S. Court of Appeals for the District of Columbia issued an opinion in the case that reined in the power of the regulator and bodes well for the mortgage industry.
Serving as PHH’s counsel in the appellate court was Mitchel H. Kider, who is the chairman and managing partner at Weiner Brodsky Kider PC, which is based in Washington, D.C.
On the Lykken on Lending podcast Monday, Kider explained the three-judge panel’s decision was made in “a well-reasoned manner” — vindicating PHH.
The litigator explained that four issues were addressed in the case.
The first is the structure of the single-director CFPB,
which the court found to be unconstitutional since the director can only be removed for cause by the president.
“My guess is that’s what concerns the CFPB the most,” he speculated.
“In the three other rulings … what the court found is that PHH’s right to due process was violated because the CFPB sought to punish them for something that the law clearly allowed,” Kider continued. “That’s one piece of it.”
He said that the regulator threw out 40 years of RESPA interpretation and came up with its own interpretation. That violated due process for taking an action against a party that’s not on notice.
Kider cited a paragraph in the decision that said the CFPB’s actions were like asking a police officer if you can cross the street, the officer says yes, then cites you when you get across the street.
Kider
said that he expects the bureau to appeal the decision, which it can do through either a request within 45 days for a re-hearing with the entire DC circuit or an appeal filed within 90 days with the Supreme Court.
He noted that if the bureau does appeal, the Solicitor General — a division of the Department of Justice — typically reviews cases argued before the Supreme Court and gets involved in issues of government constitutionality and would likely assist the CFPB.
He expects the CFPB to adhere to the appellate court decision pending appeal.
Kider suspects that marketing services agreements should be OK based on the decision as long as real services are being provided at a reasonable fair market value. But even if this is done in an “air tight” manner, he still warned that caution should be exercised.
The Federal Housing Finance Agency is similarly structured to the CFPB, and Kider suspects that similar questions could be raised by others at some point about FHFA.
“I think the basic fundamental analysis really is going to come down to whether or not any type of an entity that’s structured like the CFPB … possesses unilateral authority to bring law enforcement actions against private citizens because that really is, as the court says, the core of executive power and, as the court says, that’s the primary threat to individual liberty that’s posed by executive power,” he said. “And that’s where you really need to have accountability and checks and balances.”
While Kider doesn’t expect the decision to be impacted by the outcome of the presidential election, he does see impact from the election on the CFPB and regulations since Republican nominee Donald Trump has indicated he is going to abolish regulation.
He doesn’t see any change if Democratic nominee Hilary Clinton is elected.
