PHH v. CFPB: RESPA Holding Reinstated and CFPB’s Structure Deemed Constitutional

On January 31, 2018, the U.S. Court of Appeals for the D.C. Circuit issued its en banc decision in PHH v. CFPB.[1] As a reminder to those following this long-awaited decision, the Court’s en banc review was granted to reconsider the Court’s three-judge panel ruling issued in October 2016. The en banc Court reinstated panel’s decision regarding RESPA, but rejected the panel’s conclusion that the structure of the CFPB is unconstitutional.


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. A more complete review of the panel’s ruling can be found here and here. The CFPB petitioned the Court for a rehearing en banc, and oral arguments were held before the en banc Court on May 24, 2017.

The Panel’s RESPA Ruling is Reinstated:

The Court’s en banc decision reinstates the panel’s prior ruling regarding RESPA. The panel had held that RESPA permits captive mortgage re-insurance arrangements if mortgage re-insurers are paid no more than the reasonable value of the services provided, consistent with HUD’s prior interpretation. In pursuing its action against PHH, the CFPB announced—for the first time—a new interpretation of RESPA under which captive mortgage re-insurance agreements were prohibited. The panel held that RESPA’s language unambiguously allows such captive re-insurance arrangements, and that the CFPB’s attempt to retroactively apply its new interpretation violated due process. The en banc Court’s decision approves of the panel’s due process analysis, and remands the case to the CFPB for further proceedings.

The panel had also rejected the CFPB’s contention that no statute of limitations applies to administrative enforcement of RESPA. That aspect of the panel’s decision is also reinstated by the en banc Court’s decision.

The CFPB Structure Ruled Constitutional

The en banc Court held that the CFPB’s structure is constitutional and that the for-cause limitation on the President’s removal authority is a permissible exercise of congressional authority. The panel previously held that the CFPB’s single-director-removable-only-for-cause structure was unconstitutional because, among other things, it prevented the President from exercising the Faithful Execution clause. The en banc Court determined that the “for cause” removal limitations were consistent with restrictions developed for other financial regulators to insulate them from political pressures. Further, the Court reasoned that the CFPB’s structure may, in fact, bolster accountability and was consistent with presidential oversight of other agencies that regulate industries. In other words, the Court held that the constitutional issue was not even close: “[w]ide margins separate the validity of an independent CFPB from any unconstitutional effort to attenuate presidential control over core executive functions.”


Although the constitutionality of the CFPB took center stage in the panel’s October 2016 ruling, the importance of the en banc Court’s reinstatement of its RESPA holding cannot be understated.  The Court appears to have resurrected the safe harbors in RESPA Section 8(c)(2), and may warrant industry members to take another look at their advertising and services agreements. Whether or not PHH will seek a review of the constitutional holding by the Supreme Court remains to be seen.

[1] A copy of the en banc Court’s decision can be found here:$file/15-1177.pdf