• Keith Gantenbein

CFPB Gets Another Day In Court To Defend Its Constitutionality


Last year, in 2016 the Consumer Financial Protection Bureau (CFPB) levied a multi-million dollar fine against PHH Corporation for allegedly illegally referring consumers to mortgage insurers in exchange for kickbacks. PHH provides mortgage services to some of the world’s largest financial services firms and is located in New Jersey.

PHH then sued the CFPB, challenging the CFPB’s Director Richard Cordray ability to be able to increase their original $6 million fine against PHH to $103 million. PHH suggested CFPB was unconstitutional and the three judges of the U.S. Court of Appeals for the District of Columbia Circuit agreed and then declared that the CFPB’s leadership structure was unconstitutional.

The CFPB ended with filing for a review of the case, wanting the entire court to hear the case rather than the three judges who ruled on the case last October. The CFPB stated the court’s ruling “sets up what may be the most important separation-of-powers case in a generation.”

In the CFPB’s petition, they stated: “In addition, the panel’s decision misinterpreted the Real Estate Settlement Procedures Act (RESPA) in a manner that so fundamentally defeats the statutory purpose as to warrant rehearing en banc. The panel held that RESPA permits referrals made in exchange for kickbacks in the form of lucrative mortgage reinsurance business, thus defeating RESPA’s statutory prohibition of kickbacks for referrals of real estate settlement service business. To reach that result, the panel overstepped its role in reviewing an administrative decision, ignored key portions of the statutory text, and interpreted the term “bona fide” in a manner inconsistent with Supreme Court precedent. If the ruling stands, it will become easy for lenders and others who make referrals of real estate settlement service business to disguise kickbacks and evade RESPA’s prohibition.”

Thursday, February 17, 2017, the U.S. Court of Appeals ruled in favor of the CFPB’s request and is allowing the agency to go ahead to defend the constitutionality of its leadership structure. That appeal is scheduled for May 2017.

One of the directives to both parties will be addressing the issue whether the CFPB’s structure as a single-Director independent agency is consistent with Article II of the Constitution and, if not, is the proper remedy to sever the for-cause provision of the statute?

In the meantime, the CFPB will continue to operate as it has, until further notice, however, the new administration cannot fire the director at will, unless it’s for cause. The previous decision allowed the CFPB director to be fired ‘at will’. The new administration put the CFPB in the spotlight recently with a review that could scale back the agency’s oversight.

If you are experiencing an issue with your loan or mortgage, contact Gantenbein Law Firm's Denver attorneys immediately. Their unparalleled experience with foreclosures and foreclosure defense has helped countless homeowners in Colorado. For more information, visit their Colorado Foreclosure Defense webpage.

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