By John M. Pachkowski, J.D.
A two-judge majority of the U.S. Court of Appeals for the District of Columbia Circuit has ruled that the Consumer Financial Protection Bureau’s single-director structure is unconstitutional for an independent agency. To remedy this defect, the court found that the President must be deemed to have the authority to discharge the director at will and without cause. The court's cure is surely not to sit well with critics of the CFPB that had sought to abolish the bureau.
The court's ruling resolved an enforcement action brought by the CFPB involving the captive mortgage insurance arrangements by the mortgage lender -- PHH Corporation. The CFPB determined that the activities violated the kickback prohibitions found in section 8 of the Real Estate Settlement Procedures Act and ordered PHH to disgorge $109 million based on the illegal activity. On appeal, PHH Corporation contended that the CFPB changed a long-standing Department of Housing and Urban Development RESPA interpretation that allowed captive reinsurance arrangements as long as the reinsurance was purchased at market prices.
The court found that the CFPB's interpretation of RESPA could not be applied to earlier conduct and the its claims against PHH would be time barred.
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