DC Circuit grants rehearing in PHH v. CFPB

CFPB rehearing grantedToday, the DC Circuit granted the CFPB’s petition for rehearing en banc regarding a ruling issued last October by a three-judge panel that declared the CFPB’s structure unconstitutional.

The court ordered that the panel’s October 11, 2016 judgment be vacated. The court also set a briefing schedule: PHH must submit its opening brief by March 10. The court set a March 31 deadline for the CFPB’s opening brief and an April 10 due date if PHH chooses to file a reply. Oral argument is set for May 24.

The court asked the parties address the following issues in their respective briefs:

  1. Is the CFPB’s structure as a single-Director independent agency consistent with Article II of the Constitution and, if not, is the proper remedy to sever the for-cause provision of the statute?
  2. May the court appropriately avoid deciding that constitutional question given the panel’s ruling on the statutory issues in this case?
  3. If the en banc court, which has today separately ordered en banc consideration of Lucia v. SEC, 832 F.3d 277 (D.C. Cir. 2016), concludes in that case that the administrative law judge who handled that case was an inferior officer rather than an employee, what is the appropriate disposition of this case?

At issue is an October 2016 ruling issued by a three-judge panel from the DC Circuit Court which concluded that the CFPB’s single-director structure is unconstitutional because the director may be removed by the president only “for cause.” The panel remedied the constitutional defect by making the director subject to “at-will” removal by the president and by changing the CFPB from an independent agency to an executive agency.

On November 18, 2016, the Bureau filed its petition for rehearing, arguing that the panel “rendered a dramatic and unprecedented ruling that purports to override Congress’s explicit determination to create ‘an independent bureau’ to exercise regulatory and law enforcement authority.”

The DC Circuit did not issue the mandate (which would make the panel’s decision effective), because of the CFPB’s pending petition for rehearing. Although the decision had not yet taken effect, there have been differing views about Trump’s authority to remove Director Cordray pending the DC Circuit’s decision on whether to grant rehearing. By tossing out the panel’s October opinion, the court seems to have cleared up some ambiguity about the CFPB’s status as an independent agency and Cordray’s tenure and removability as CFPB Director.

Over the past few months there has been plenty of speculation about how long the appeals process might last, whether Trump will fire Cordray, or if Cordray will step down voluntarily. We’ve provided extensive coverage of the case so far and will continue to track developments as they arise. We expect that this is just the latest in what promises to be a lengthy legal battle. Please subscribe to receive the latest updates and developments in this case and other matters affecting federal consumer finance regulations.

By | 2017-02-16T12:48:11+00:00 February 16th, 2017|CFPB Enforcement, Legal Developments, Uncategorized|0 Comments
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