U.S. Department of Justice Files Amicus Brief Against CFPB


3/20/2017 8:00 AM

The Trump administration supports PHH, arguing that the removal restriction for the Director of the CFPB is an unwarranted limitation on the President’s executive power.

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Last Friday, the U.S. Department of Justice (DOJ) filed an amicus (“friend of the court”) brief with the U.S. Court of Appeals for the District of Columbia Circuit in the closely-watched PHH Corp. v. Consumer Financial Protection Bureau case. The CFPB has asked the full slate of D.C. Circuit Court judges to undo the appellate panel’s previous ruling that the bureau’s single-director structure is unconstitutional. 

Switching sides from its original stance back in December, when the Obama administration Justice Department criticized the appeals court ruling, the DOJ is now urging the en banc (“full”) court to agree with the panel’s previous decision and strike down the Dodd-Frank Act’s “for-cause removal provision,” allowing the president to fire the CFPB’s director at will.  Taking this position puts the DOJ at odds with the CFPB’s position in the case.

In its brief filed by the DOJ, the U.S. stated that while it does not agree with all of the reasoning in the panel’s opinion, it agrees with the panel’s conclusion that “a removal restriction for the Director of the CFPB is an unwarranted limitation on the President’s executive power” and that “the panel correctly concluded . . .  that the proposed remedy for the constitutional violation is to sever the provision limiting the President’s authority to remove the CFPB’s Director, not to declare the entire agency and its operations unconstitutional.”    

After the DOJ filed the amicus brief in the PHH Corp. case, House Financial Services Committee Chairman U.S. Rep. Jeb Hensarling (R-Texas) released the following statement:

“Republicans have said for years that the Bureau is unconstitutionally structured.  Its lack of accountability and unparalleled authority placed in the hands of the Bureau’s unaccountable sole director make the CFPB arguably the most powerful and least accountable bureaucracy in American history.  Owing to its unconstitutional structure, the Bureau’s sole unaccountable director, unlike bipartisan commissions, can act unilaterally to eliminate access to credit options and increase consumer costs.  In addition, the Bureau does not recognize core constitutional principles like the right to due process.  Instead, it relies almost exclusively on its vague or undefined enforcement authority to practice regulation by enforcement.  The Bureau’s consumer protection mission is important, but not government agency – no matter how well-informed – should be able to evade common sense checks and balances that are necessary for accountability.  I applaud the Department of Justice for recognizing this unconstitutional CFPB must not stand and must not continue to harm the very consumers it is supposed to protect.”

On March 10, ACA International filed an amicus brief in the PHH Corp. case to share with the appellate court its unique and direct perspective on why it believes the bureau’s powers must be reined in within constitutional bounds to ensure accountability and transparency.  In its brief, ACA argued that “[t]he Bureau’s structure and function —wielding power over a broad swath of Americans’ lives, concentrating power in the hands of a single Director, insulated from democratic accountability —is ripe for the arbitrary and unrestrained exercise of power in disregard for due process, and for the constitutional rights of the objects upon whom that power is exercised.” 

In its decision last October, a three-judge panel on the D.C. Circuit Court of Appeals determined the CFPB is controlled by a single, “unaccountable, unchecked” director, who can only be removed for just-cause, which poses the risk of “arbitrary decision-making and abuse of power” versus a multi-member independent agency.  The appellate panel ultimately ruled that the CFPB could continue operating, but that the director could be replaced at will.  However, when the appeals court granted the CFPB’s request for rehearing, it also ordered the panel’s October 2016 decision vacated, which gave the CFPB another chance to defend  its single-director structure. 

The appellate court’s October decision stems from a $109 million enforcement action issued by the CFPB in 2016 against PHH Corp, a mortgage servicer, alleging kickbacks in exchange for real estate referrals, which is in violation of the Real Estate Settlement Procedures Act (RESPA). 

Briefing in the case is scheduled to conclude by April 10, and the D.C. Circuit is scheduled to hear oral argument on May 24. 

ACA will continue to follow the PHH Corp. case and will keep its members posted on any additional new developments. 

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