The long-awaited rematch of PHH Corporation versus the Consumer Financial Protection Bureau occurred last week. Although the judges hearing the case seemed sharply divided, this much is clear: They will decide the constitutionality of the CPFB.
All the members of the United States Court of Appeals for the D.C. Circuit, sitting in what’s called an en banc session, reconsidered an earlier decision by a three-member panel of their court. The panel decision had found that the CFPB was unconstitutional because it interfered with the president’s authority as the sole executive. In that same decision, the three judges unanimously disagreed with the CFPB’s arguments about PHH’s allegedly violating the Real Estate Settlement Procedures Act.
In the en banc proceeding, the strongest contingent of judges appeared to favor the view that existing precedent from the United States Supreme Court requires them to find that the CFPB is constitutional. Here is the audio. You can judge for yourself. If D.C. Circuit goes that way, the Supreme Court, if it takes the case, would then have to decide whether that analysis is correct and, if so, whether it wants to continue that precedent.
Very little of the oral argument focused on the issue of PHH’s alleged violations of RESPA. That discussion took place at the end of the hearing. By that point, the CFPB’s lawyer seemed willing to accept reversal on the RESPA questions if it allows the bureau to pass constitutional muster.
Assuming the D.C. Circuit finds the CFPB to be constitutionally structured, things will get even more interesting. That ruling would leave PHH and the United States (meaning, the Trump administration) in the position of having to petition the high court to rule the other way. By statute, the CFPB is barred from representing itself before the Supreme Court unless the Attorney General permits it to. How exactly Jeff Sessions would handle that matter is anyone’s guess. I can’t imagine the Supreme Court would look favorably on any political maneuvering that left the bureau voiceless at that level of judicial review.
Also, given that hardly any of the oral argument dealt with RESPA, it seems likely that the D.C. Circuit will affirm the panel’s earlier findings on those statutory questions. That would be a good development for the industry and a blow to the CFPB, although not a fatal one.