PHH

On July 2, 2018, All American Check Cashing, Inc., Mid-State Finance, Inc., and the president and owner of both companies (collectively, “All American”) filed a brief asking the U.S. Court of Appeals for the Fifth Circuit to find the Bureau of Consumer Financial Protection (“BCFP” or the “Bureau”) (formerly known as the CFPB) unconstitutionally structured…

On June 21, 2018, U.S. District Judge Loretta A. Preska (S.D.N.Y.) ruled that the structure of the Bureau of Consumer Financial Protection (the “Bureau”) was unconstitutional and, therefore, the Bureau lacked authority to bring claims under the Consumer Financial Protection Act (“CFPA”). The ruling rejected the D.C. Circuit’s en banc opinion in PHH that upheld…

Richard Cordray, the first and only Director of the Consumer Financial Protection Bureau, announced today that he will resign from the Bureau by the end of November–presumably in order to explore a run for governor in his home state of Ohio.  Cordray, a Democrat, was appointed to serve as the agency’s first Director in a recess appointment by former President Obama in 2012.  He was subsequently confirmed by the Senate in July of 2013.  Since that time, Cordray has been the face of the young agency as it pursued aggressive policy and enforcement initiatives.  …
Continue Reading Richard Cordray Resigns from the CFPB

On September 29, 2017, a coalition of bank and trade associations filed a federal court challenge to the Consumer Financial Protection Bureau’s (“CFPB” or the “Bureau”) arbitration rule. The industry group plaintiffs allege that the arbitration rule is illegal on four grounds, including that the CFPB’s actions are unconstitutional, and that the Bureau violated the Administrative Procedure Act (“APA”) in conducting and interpreting the arbitration study it used to justify the rule.

The Bureau published its final arbitration rule in July. As we have explained previously, the regulation would generally prohibit financial services businesses from including arbitration clauses in consumer contracts unless those arbitration clauses expressly permit class actions to proceed in court. In reaching the conclusion that the arbitration rule was justified, the CFPB relied on a study it conducted on the effects of consumer arbitration clauses in the financial services industry.

The lawsuit argues that the district court should invalidate the arbitration rule on four grounds:

  1. The structure of the Bureau, with its single director removable only for cause, is unconstitutional, and this unconstitutionality “fatally infected” the passage of the rule. This constitutional argument has been previously raised in the PHH case, which we have previously discussed.
  2. The Bureau’s study into the effects of mandatory arbitration does not properly support the rule under the APA,  because it improperly limited public participation, used improper methodologies, misconstrued the data, and did not address additional essential considerations.
  3. The Bureau’s interpretation of this study also violated the APA because its conclusions ran counter to the factual record the Bureau developed, and thus was arbitrary and capricious.
  4. Adoption of the arbitration rule violated the directive of the Dodd-Frank Act to implement a rule limiting the use of consumer arbitration clauses only if such a rule was in the public interest and advanced consumer welfare. Along similar lines, the Office of the Comptroller of the Currency recently published a report indicating that the arbitration rule would increase credit costs for consumers.

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Continue Reading Industry Coalition Challenges CFPB Arbitration Rule in Court

On May 24, 2017, the U.S. Court of Appeals for the D.C. Circuit held en banc oral argument in the rehearing of PHH Corp., et al. v. Consumer Financial Protection Bureau (“PHH”).  The lively oral argument extended well beyond the time originally allotted by the Court, as lawyers for PHH, the Department of Justice, and the Consumer Financial Protection Bureau took turns trying to help the Court evaluate whether the structure of the CFPB or the Bureau—particularly the role of a single director who may be fired only for cause—violates the Constitution.
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Continue Reading D.C. Circuit Holds Oral Argument in Rehearing of PHH v. CFPB

As we previously discussed, on February 16, 2017, the D.C. Circuit granted rehearing en banc in PHH v. CFPB and vacated the holding from the three-judge panel that the CFPB’s single director structure was unconstitutional.

Through an unopposed motion filed on March 3, 2017, the Office of the Solicitor General (“SG”) requested an extension…

The D.C. Circuit today granted rehearing en banc in PHH Corp., et al. v. Consumer Financial Protection Bureau (“PHH”), vacating the prior order that, among other things, found the Consumer Financial Protection Bureau’s (“CFPB”) structure unconstitutional. The court directed the parties to brief a set of questions related to: the constitutionality of the Bureau’s structure; whether the court could resolve the case solely on statutory grounds;  and whether another case, involving the status of Administrative Law Judges (“ALJs”), should affect the outcome here.   Oral argument is set for May 24. Briefs for PHH (and any amici curiae in support of PHH) are due March 10.  Briefs for the CFPB (and any amici curiae in support of the CFPB) are due March 31.
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Continue Reading D.C. Circuit Grants Rehearing En Banc in PHH