Even though government organizations and groups are formed with a mission to serve the American people, there are times when those groups overstep their boundaries. Of course, the folks in charge of these organizations and those who support said government groups usually don’t like it when individuals or businesses challenge the authority of governmental organizations. But in order to keep the powers that be honest, in check and accountable, there are times when the powers have to be challenged.
Such is the case with a lawsuit that sees a business challenging the constitutionality of the Consumer Financial Protection Bureau’s power. This trial is the official case of PHH Corp. versus the CFPB. It is just getting underway, and will be heard in the U.S. Appeals Court for the District of Columbia. This case will likely drag on for a while, but legal experts expect to get a ruling on this case before the year ends.
PHH Corp is a lending company based in New Jersey. This company is working to get a $109 million penalty that the CFPB issued overturned. The penalty was issued back in June of 2015 with regard to PHH’s alleged violations of RESPA (the Real Estate Settlement Procedures Act.) This case is going to be one to watch, and will likely set a huge precedent due to the fact that it is the first time since the CFPB began – which was about 5 years ago – in which a company has issued a direct judicial challenge against a CFPB mandated penalty.
The CFPB first announced that it was taking action against PHH in the first quarter of 2015. The bureau sought a civil fine, victim restitution and an injunction to prevent PHH from violating in the future. In November of 2014, a judge said that PHH received kickback payments via reinsurance premiums that were paid to a company that is a subsidiary of PHH. The payments were given by mortgage insurers and the entire set up was found to be a RESPA violation. The judge ordered that PHH pay a $6.4 million penalty for their part in these things.
PHH did what any company would do, and appealed this ruling. This prompted the Director of the CFPB, Richard Cordray to both deny the appeal and to up the penalty to a whopping $109 million. Cordray said the original ruling was not correct because it did not account for the payment methods on mortgage premiums. The CFPB even went on record with allegations that PHH had been receiving kickbacks for these types of deals as far back as the 1990s.
The lawyers for PHH Corp. stated, “Never before has so much authority been consolidated in the hands of one individual shielded from the president’s control and Congress’s power of the purse.” These lawyers immediately filed a petition with the court of appeals, and claimed that the CFPB was abusing its considerable power. As a result, we are now witness to a case where a company has boldly gone where no other business has, and is actually making a legal case that challenges not only the power that the CFPB has, but also the constitutionality of the organization as a whole.
Cordray and the CFPB have made their fair share of enemies over the years. Currently, there are even Republican and Democrat leaders working hand-in-hand to prevent the bureau from enabling new short term lending restrictions in the near future. As such, this case will likely go down in the history books as a case of lending companies getting fed up with the CFPB and finally exercising their rights to do something about it.