PHH Granted Stay in CFPB Decision, Questions Bureau’s Power (Aug. 18, 2015)
In a blow to the CFPB, mortgage servicer PHH Corp. earlier this month was granted a stay pending appeal of a $109 million enforcement action issued by Director Richard Cordray and the bureau in June.
The case involved alleged payment of kickbacks in exchange for real estate referrals, which is in violation of the Real Estate Settlement Procedures Act (RESPA), and was heard by an administrative law judge. The judge decided against PHH and assessed the company a $6.4 million penalty. PHH and the CFPB appealed the decision on different grounds. However, under provisions of the Dodd-Frank Act, the appeal was reviewed by Cordray, who increased the penalty from $6.4 million to $109 million (See Pay Gov, Vol. 9, Issue 12).
In determining whether to grant the motion for stay pending appeal, the U.S. Court of Appeals for the D.C. Circuit was required to weigh four factors: (1) the likelihood that the moving party will prevail on the merits; (2) the prospect of irreparable injury to the moving party if relief is withheld; (3) the possibility of substantial harm to other parties if relief is granted; and (4) the public interest. It’s unclear from the single line in the order–“[p]etitioners have satisfied the stringent requirements for stay pending appeal”—upon which argument the court has determined that PHH would be likely to prevail on the merits.
Not only did PHH’s successful appeal get the company a stay from the enforcement action levied by Cordray, challenging the bureau’s interpretation and application of RESPA, but it also challenges the constitutionality of the bureau under the Separation of Powers Doctrine. “This brazen disregard for judicial authority, agency precedent and fair notice is a symptom of the larger constitutional problems here. The CFPB places legislative, executive and judicial power all ‘in the same hands’ of a single person—what James Madison called ‘the very definition of tyranny,’” PHH wrote in its request for a stay pending judicial review.
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