CFPB Denounces 'Wrongly Decided' PHH Ruling

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WASHINGTON – The Consumer Financial Protection Bureau decried an appeals court ruling last week that found its single-director structure unconstitutional, saying the opinion was "wrongly decided" and had "no basis in the text of the Constitution or in Supreme Court case law."

In a brief filed October 14 in an unrelated case, CFPB v. Intercept Corp., the agency said that a motion by the defendant to dismiss charges based on last week's ruling by the U.S. Court of Appeals for the DC Circuit should be ignored because that ruling was erroneous and will be overturned on appeal. The ruling in PHH v. CFPB, the agency argued, relied on a novel and heretofore unconsidered reading of the Constitution that determined that independent commissions may not be headed by a single director.

"This principle has no basis in the text of the Constitution or in Supreme Court case law," the CFPB said in its Intercept brief. "The panel decision was wrongly decided and is not likely to withstand further review."

The agency said even if the PHH decision had more merit, it would not have bearing in the Intercept case since the CFPB has not yet had an opportunity to prepare an appeal to the D.C. Circuit en banc. Further, the case would not apply to the eighth circuit, where the Intercept case is being heard.

The CFPB has thus far not made any public statements about whether it intends to appeal the PHH decision. During a public appearance in Philadelphia on Tuesday, CFPB Deputy Director of Enforcement Jeffrey Ehrlich reportedly declined to say whether the agency would appeal, saying the agency would make no advance notice of its decision. Nonetheless, the agency is widely expected to challenge the opinion, and the brief in the Intercept case appears to signal that such a move is all but inevitable.

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Law and regulation Consumer banking AML Dodd-Frank SIFIs