PHH v. CFPB: Full D.C. Circuit Holds Oral Argument in Rehearing

On May 24, 2017, the U.S. Court of Appeals for the D.C. Circuit, sitting en banc, heard oral arguments in the rehearing of PHH Corp., et al. v. Consumer Financial Protection Bureau (“PHH”). The constitutional issue took center stage as the parties argued whether the CFPB’s structure is consistent with Article II of the Constitution.


This case began as a CFPB enforcement action under the Real Estate Settlement Procedures Act (“RESPA”), but has evolved into an existential dilemma for the CFPB. On October 11, 2016, a three-judge panel of the D.C. Circuit held that the structure of the CFPB is unconstitutional because it is headed by a single director who is removable only for cause. The decision also overturned the CFPB’s interpretation of Section 8 of RESPA, held that the Bureau’s attempt to retroactively apply its interpretation of RESPA to PHH in an enforcement proceeding violated due process, and determined that RESPA’s three-year statute of limitations applied to CFPB administrative proceedings. The CFPB petitioned the Court for a rehearing en banc, and the D.C. Circuit granted the request on February 16, 2017.

The Argument

The en banc hearing primarily focused on the Constitutional issue, and featured arguments from both parties and the U.S. Department of Justice (DOJ). The DOJ, which had originally supported the CFPB’s position in PHH under President Obama, switched sides after President Trump took office and appeared at oral argument as amicus curiae arguing against the CFPB.

Counsel for PHH argued that the sweeping powers and single-director structure of the CFPB violates Constitution by diminishing the President’s power to see that the laws are faithfully executed. The panel repeatedly questioned this argument in light of Supreme Court cases that have upheld the for-cause limitation on the President’s ability to fire FTC Commissioners (Humphrey’s Executor v. United States, 295 U.S. 602 (1935)) and the appointment of a single independent counsel (Morrison v. Olson, 487 U.S. 654 (1988)).

Attorneys for both PHH and the DOJ attempted to distinguish these cases. Specifically, they aimed to distinguish Humphrey’s Executor as limited to multimember agencies, and Morrison as involving an inferior officer with limited jurisdiction and tenure.  They further argued that these precedents were narrow exceptions to constitutional principles and should not be extended to the CFPB Director.

In response, the CFPB’s attorney argued that the President’s authority to fire the Director for cause makes the Director sufficiently accountable under the Constitution.  Several judges questioned this logic and expressed concern that such a principle could be extended to even protect the President’s cabinet members.  The Court further questioned whether certain aspects of the Bureau’s structure, such as the broad scope of its powers and its freedom from the appropriations process, should be considered by the Court as factors in its constitutional analysis.  The Bureau’s counsel replied that each of those factors added “zero” to the analysis. In its rebuttal, PHH argued that these factors were not zeros, and are significant enough to make the CFPB unconstitutional even if it was a multimember Commission.

Notably, the arguments involved very little discussion of the underlying RESPA and statute of limitation issues. This perhaps indicates that the Court is less inclined to revisit these issues, but on the other hand, the oral arguments did not examine several issues on which the Court requested briefing. For example, the oral arguments did not examine the parties’ briefing on whether the Court could avoid ruling on the constitutional issue altogether.


A decision from the Court is not expected for months. While questions asked during oral argument can often provide insight into a judge’s thought process, these questions do not always coincide with how a judge will vote on a particular issue. That said, several judges certainly gave an impression that they did not view the CFPB as a structural anomaly in comparison to other independent agencies. Furthermore, several judges appeared concerned that the Court of Appeals was bound by Humphrey’s Executor and Morrison, and that the Supreme Court will need to resolve whether to overrule or limit these cases. Naturally, this case may still have a long road ahead. Regardless of the outcome, we will continue to monitor this case and provide regular updates.