CFPB seeks input on overhaul of internal legal proceedings

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The Consumer Financial Protection Bureau is seeking comment on how it sues companies via an internal process rather than the traditional court system.

The agency said Wednesday that it will soon take public input on how to improve an internal process, called the administrative adjudication process, in which companies under investigation are heard by a CFPB judge.

Some federal regulators have a similar process but the CFPB said in its request that its process “can result in undue burdens, impacts, or costs on the parties subject to these proceedings.”

One of the CFPB’s most heated administrative cases began in 2014, when it cited mortgage lender PHH Corp. for violating a mortgage law related to referrals with insurers. The case began to go awry when former CFPB Director Richard Cordray partly disagreed with the administrative law judge’s findings and ramped up the fine to $109 million. PHH fought back in the appeals court, going so far as to challenge the constitutionality of the CFPB as having a single director who can only be fired by the president “for cause.”

On Wednesday, the U.S. Court of Appeals for the D.C. Circuit said that the CFPB’s single director structure is constitutional, overturning a previous court ruling. However, the appeals court did agree with a lower court ruling that threw out PHH’s fine on grounds that Cordray misinterpreted a real estate settlement law.

The CFPB, now under Republican appointee acting Director Mick Mulvaney, is going through a revamp of its enforcement policies and practices. The request for comment on its administrative adjudication process is the second one the agency issued since last week, when it sought a public review of how it should investigate companies that face a potential enforcement action.

The CFPB expects it will begin taking comments on its administrative adjudication process on Feb. 5. The agency also said it plans to issue a third request for public comment related to its enforcement process next week.

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