The CFPB will face PHH Corp in the D.C. Circuit Court of Appeals April 12 after the mortgage lender fought back against a stiff penalty ordered byDirector Richard Cordray.
The case stemmed from a CFPB order against PHH after the lender allegedly accepted kickbacks from mortgage insurers, which led to rising costs for borrowers. PHH fought the resulting CFPB fine of $109 million, calling into question the agency’s and Cordray’s authority.
In court documents, PHH cited Cordray’s decision to override a portion of an administrative law judge’s decision – which stemmed from an appeal by PHH on the original matter – and his choice to inflate the original fine of $6 million to $109 million.
PHH referred to the decision as the very definition of tyranny because it was at the hands of the agency’s solitary director.
As a result of the company’s appeal, the CFPB applied its authority over RESPA rules, which were transferred to the bureau as part of the Dodd-Frank Act. The fine was increased when Cordray applied the date RESPA was applicable to mortgages, which was on or before July 21, 2008, as opposed to the effective date of the CFPB’s authority on July 21, 2011, court documents said.
PHH argued the RESPA rules in question were ambiguous and the director’s interpretation of the rules were not valid. However, the CFPB argued the director’s reasonable interpretation resolved the ambiguity in the rules.
PHH further argued both the CFPB and its director acted in a “brazen disregard for judicial authority, agency precedent and fair notice,” which it said was symptomatic of a larger constitutional problem.
The company added that even if the director’s interpretation was permissible, it could apply to conduct dating back to and before 2013, which was the last time PHH received any mortgage reinsurance premiums.
“The director’s autocratic approach is the all-too-predictable result of his unprecedented lack of democratic accountability, which violates the constitutional separation of powers,” PHH said in court documents. “The sanctions imposed are also invalid because the injunctive provisions are vague, overbroad and outside the CFPB’s authority.”
PHH added that the court should vacate the director’s actions.
The company received a stay of the bureau’s order on Aug. 3, 2015.