Last week insideARM reported the breaking news about a District of Columbia Appeals Court decision that ruled the structure of the Consumer Financial Protection Bureau (CFPB) was unconstitutional.  The case is PHH Corp. v. Consumer Financial Protection Bureau, United States Court of Appeals, D.C. Cir., Case No. 15-cv-01177.  Our initial story can be found here.

On Wednesday, October 12th we published an article by Kelley Knepper Stephens that provided a more detailed analysis of the decision.

Both stories garnered significant attention among our audience.  Still, the mainstream press and people within the ARM industry will be talking about the case and what it might mean for some time to come.

We asked some well-known industry experts for their thoughts on the opinion and its possible ramifications.  Below are some of the responses.

Rozanne Anderson, Vice President and Chief Compliance Officer at Ontario Systems

“The decision makes clear the CFPB is empowered by Congress to enforce 19 unique consumer protection laws but not empowered to rewrite them. It is refreshing to read this Court’s explanation as to why the CFPB’s practice of announcing new interpretations of the law and enforcing the new interpretations is unconstitutional. Under our system of rulemaking, parties affected by new regulations, including the business community, have a right to receive notice of proposed changes and the right to comment on the proposed changes in the law before they will be held accountable for compliance. Hopefully this decision signals a similar view towards the Federal Communication Commission’s creative writing exercise with its 2015 Order interpreting the Telephone Consumer Protection Act.”

Manuel H. Newburger, Attorney at Law, Barron & Newburger, PC

“Although this was a RESPA case, the ruling on due process is very significant for the collection industry as it has the potential to deter the Bureau’s ongoing regulation by consent order. The Bureau has been taking enforcement positions that are contrary to existing case law, on which many industry members have relied. This decision may cause some targets of Bureau investigation or enforcement actions to decide to fight, rather than settle (assuming that they have the resources to take on a fight).

I also expect the ruling on the statute of limitations to be a frequent topic of conversation in CID “meet and confers.”  To date, Bureau lawyers have insisted that there is no statute of limitations for enforcement actions. Now that they have lost on the limitations issue both in judicial proceedings and administrative proceedings it will be interesting to see if the Bureau starts to limit the temporal scope of its CIDs or if it will try to force a third confrontation on the limitations issue.”

Christopher J. Willis, Attorney at Law, Ballard Spahr

"I think the decision is significant, but not really for the constitutional issue.  To me, there are three key takeaways from the decision:

  1. The court's opinion criticizes the CFPB for announcing a new rule or interpretation of law and then applying that interpretation retroactively in the form of an enforcement action.  This is a relatively common thing for the CFPB to do, as it determines that certain practices constitute UDAAP violations.  The court's criticism of the CFPB for doing this will give targets of enforcement actions additional fuel to argue that the CFPB's retroactive application of UDAAP principles through consent orders is unfair.
  2. The statute of limitations holding of the Court, which contradicts a position the CFPB has consistently taken, should operate to reduce the time periods for which the CFPB can seek relief, and limit the temporal scope of its enforcement actions.
  3. The agency repeatedly asked the DC Circuit to give deference to its interpretations of statutes – both RESPA and Dodd-Frank – and the Court refused in all instances, holding that the CFPB's interpretation of the statutes was contrary to the plain language, and in some instances produced absurd results.  This may embolden more parties to litigate issues with the agency, because it shows an example of a court refusing to adopt the agency's reading of the statutes it is responsible for administering." 

Johan Bedard, Attorney at Law, Bedard Law Group, P.C.

“Liberty’s last chance at protection occurs in the American courtroom.  Yesterday, our court system sided with the people in protecting individual liberty against the tyranny of an oppressive, unconstitutional, government agency.

In the end, which will not come for a decade or more, this decision will indeed move the needle a little for the collection industry, but not soon enough and not dramatically enough to stop the change sweeping the industry today.

The Court leaves the door ajar for victims to advocate for additional remedies to correct the Bureau’s past unlawful actions.

No doubt, the case is not over until the Supreme Court weighs in.”

Tim Collins, General Counsel, Convergent Outsourcing, Inc.

“My initial thought is this really doesn’t change anything. It is just confirmation of what we all thought about the structure of the CFPB. The CFPB Examiners are still going to do what they do and so will everyone else at the CFPB. I think the CFPB will appeal the decision if nothing else to leave the status quo in place for as long as possible. If not, it will still be 90 days before this case is sent back down to the district court level. If anything, this may give Congress some momentum, depending on the outcome of the election season, to make some changes to the CFPB structure.“

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