It was coming out in July. Then by the end of the summer. Then there was a rush to believe it was due out Sept. 16.
Yet the calendar turns from September to October, and the financial services industry still waits for the District of Columbia Circuit Court of Appeals to issue its ruling in the PHH Corp. v. Consumer Financial Protection Bureau (CFPB) case which was heard April 12.
In September the court issued 24 rulings, with 35 decisions handed down in August. And yet none of them involve PHH.
Why is that important? The potential ramifications of the PHH Corp. appeal of the administrative ruling by the CFPB and Director Richard Cordray are far-reaching. The issue does not just include whether the interpretation of RESPA Section 8 has changed under the CFPB’s watch, but issues of the constitutionality of the CFPB itself, the unlimited statute of limitations sought in an administrative hearing, as well as the position of Cordray as a single director, were addressed in oral arguments before the court.
“The vice of putting all of that power [into one person] instead of separating it is the same thing that happens here [at the court]. When you have to make a decision, there are three of you, or at least two of you. … The decision-making power is dispersed among individuals,” Attorney Theodore B. Olson argued before the appellate court in April. “Here it is concentrated in a single individual. The president does not have power to remove that individual.”
Appearing on behalf of the CFPB, Attorney Lawrence DeMille-Wagman asserted that any defect could be remedied by invalidating the Dodd-Frank Act’s “for cause” requirement, such that the director would serve at the pleasure of the president.
Two of the three judges on the appellate court were present at oral arguments, and the line of questioning suggested that the court was open to the idea of tailoring the decision beyond simply the interpretation of RESPA.
That is why the industry has been anxiously awaiting the ruling, to see just how far the appellate court would go. Would it rule that the CFPB had to remain within the three-year statute of limitation set in the Consumer Financial Protection Act for all enforcements? The CFPB recently handed out an enforcement action against First National Bank of Omaha that addressed fraudulent activities reaching back to 1997 – more than six times the three-year statute of limitations.
Would the court rule that the structure of the bureau was unconstitutional as long as Cordray served as a single director? If so, how would new appointees for a commission board of sorts be chosen? Could anyone be approved in today’s political climate?
If the court ruled the CFPB was unconstitutional, would it stop at saying the bureau needed more than one director? Or would it invalidate more than five years of regulatory activities because the CFPB had operated unconstitutionally the entire time?
However the decision comes down, an appeal is expected from the side which loses the ruling, appealing either to the full D.C. Court of Appeals or to the Supreme Court. Should the decision come down in October, it could have an impact on the presidential election as well, as candidates are asked to react to the possibility of a newly structured CFPB.
Until that time, though, the industry will wait. And wait. As it has for the past five-and-a-half months.