The Attorneys Told the Audience There Are Two Main Points at Issue

May 24, 2017

Today, AEA DC Representative, Arthur Davis attended a briefing given by the litigating attorneys responsible for the Amicus Brief filed by AEA and other industry trade associations in support of PHH Corp in its battle with the Consumer Finance Protection Bureau.

The AEA amicus brief in support of PHH was among others also filed in support by the likes of The Chamber of Commerceof the United States of America, the American Bankers Association, American Financial Services Association, Consumer Bankers Association, Mortgage Bankers Association, Housing Policy Council of the Financial Services Roundtable, Real Estate Services Providers Council, ACA International, The Cato Institute and the Attorneys General of Missouri, Alabama, Arizona, Arkansas, Georgia, Idaho, Indiana, Kansas, Louisiana, Nevada, Oklahoma, South Dakota, Texas, West Virginia, and Wisconsin.

The attorneys told the audience there are two main points at issue:

First, there are statute of limitations limits and fair notice requirements that must be followed regarding how far the CFPB can go in fining companies for alleged RESPA violations.

The attorneys expect the DC Circuit to restore consistency with prior positions of HUD on these matters. That is, reestablishing that the proper procedure for the CFPB to follow, is by way of a formal rulemaking rather than development of a legal position through prosecution and enforcement. When new rules of the road are thus adopted by the Bureau, those new rules, fully vetted by the regulated public, would be enforceable.

Second, with respect to the broader issue of the singular authority of the CFPB Director, the Court is expect to clarify the constitutionality of the “only for cause" threshold for removing the CFPB director. It is also expected that the working definition of "for cause" will be clarified to be something more than just a matter of policy differences.

The case is expected to be decided sometime duringthe Fallof 2017, although it may drag on into next year if further appeals are filed.

The Court could choose to avoid the constitutional question of “only for cause” firing. However, since all parties to the litigation have urged the Court to provide a decision on this issue and the Court itself asked all parties to address the issue in their briefs, all involved expect the Court to hit the issue head on.

It is interesting to note that regardless of the Court’s ruling, if Director Cordraywere to complete his full term in July 2018 and no one is confirmed to replace him, he would likely continue in office. However, the "for cause" protection he now enjoys would expire with the end of his five year term and he would be considered serving “at will.” This would mean he could be dismissed by the President for any reason and at that time.

Additionally, if he were dismissed "for cause" before the expiration of his term, it is possible that the best he could do would be to sue only for the value of the remainder of his term. While it would be possible that he could obtain a federal injunction to keep his job, under those circumstances, it’s doubtful he would go to the trouble to force himself into a place where he is not wanted.

In summary, although we all must wait for the final result, it is likely that RESPA as we know it will be preserved and that will be good news to AEA members and their companies.

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