The U.S. Court of Appeals for the D.C. Circuit heard oral arguments in a case against the structure of the CFPB Tuesday in a rare case against the bureau.
PHH Corp. pushed back against a CFPB order the bureau made against the lender after it allegedly accepted kickbacks from mortgage insurers. In an appeal to the ruling, PHH called into question the agency's and Cordray's authority.
The three-judge panel listened to arguments on the constitutionality of the agency and its single director, and whether it violated separation of powers. Ted Olson, a partner at Gibson, Dunn & Crutcher, argued on behalf of PHH, while Lawrence DeMille-Wagman argued for the bureau.
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"Today's oral argument was the Super Bowl for the CFPB," Jennifer Lee, a partner at the international law firm Dorsey & Whitney, said. "The D.C. Circuit was hostile toward the CFPB's arguments on the statute of limitations, separation of powers, constitutionality of the agency, penalty calculation and the CFPB's interpretation of the Real Estate Settlement Procedures Act when it comes to defining a kickback."
Lee said the CFPB's argument that the CFPB should have a single director because other agencies do did not persuade the judges. The judges' questions focused on whether an agency that has extremely broad powers and authorities can truly be held accountable as a government entity in the absence of a bipartisan or non-partisan commission at the helm, she added.
"What was most interesting about the judges' questions was that they revealed the court's underlying assumption that if a practice is widespread in the industry, it must be because industry actors held a widespread belief that the practice was legal under RESPA," Lee said. "This is an underlying assumption that the CFPB does not share. If anything, the CFPB errs on the side of assuming the opposite, which is essentially the driver of each issue that was before the court today and which is what led the CFPB director to issue its order in the first place."
Congress has also looked at the structure of the CFPB. The House Financial Services Committee has offered up bills that sought to create a board structure at the CFPB, among other bills taking aim at the agency.
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