03 February, 2018
But the diverse opinions from the circuit offer the Supreme Court an opening to issue a landmark ruling on how the bureau violates the Constitution's separation of powers. PHH Mortgage Corp. had been fined $109 million by the bureau for alleged misconduct.
Finally, the majority held that the functions of the CFPB and its Director, unlike, for example, the Secretary of State or another Cabinet officer, are not core executive functions, and financial and consumer protection regulators have always been afforded a degree of independence, citing the FTC, the Federal Reserve, the FDIC, and others as examples. In reversing the earlier ruling, the court accepted the argument that Congress could create a uniquely structured agency as a way to shield the bureau from political influence.
The court cited examples of other federal financial regulators that Congress deemed to be independent, including the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the National Credit Union Administration, and the Securities and Exchange Commission.
Though Wednesday's ruling rejects PHH's constitutional challenge, it reinstates an earlier ruling by a panel of the D.C. Circuit, which vacated the disgorgement order against PHH.
Kavanaugh's dissent said independent agencies hold enormous power and they "collectively constitute, in effect, a headless fourth branch of the USA government".
The case had been brought byPHH Corp., which argued the bureau's setup was unconstitutional because it put too much power in a single director, and that the CFPB misapplied RESPA law.
Acting CFPB Director Mick Mulvaney now must determine whether the premiums that PHH paid to a reinsurer were reasonable.
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One Republican appointee joined all five Democrats presiding over the case to uphold the agency structure, established in 2010 by the Dodd-Frank financial reform bill.
"The Consumer Bureau is constitutional and is here to stay", Rep. Maxine Waters, a California Democrat and the ranking member of the House Financial Services Committee, said in a statement. "Because none of PHH's challenges is grounded in constitutional precedent or principle, we uphold the agency's structure".
Banking industry lobbyists and right-wing think tank scholars had been among those who signed friend of the court briefings urging judges to change the CFPB structure. In an unusual turn, the Trump Justice Department opposed the agency within its own government in the case and could be expected to appeal the latest decision.
His resignation sparked a fight over who would serve as acting director until a permanent replacement is nominated by President Donald Trump and then confirmed by the Senate.
The case itself isn't over: The Trump administration and PHH are likely to appeal the case up to the U.S. Supreme Court, according to a report in Bloomberg.
The procedural uniqueness of the case makes it uncertain whether it will be appealed to the Supreme Court. Trump's pick, Mick Mulvaney, prevailed in the end.
Among the questions asked in the request for information is whether CFPB should only contest issues in federal court, and not use the administrative adjudication process.