On January 31, 2018, the U.S. Court of Appeals for the D.C. Circuit upheld a federal statute curbing the President’s power to fire the director of the Consumer Financial Protection Bureau (“CFPB”), a financial regulator with the mandate to enforce federal consumer protection laws.[1]  In a 7-3 en banc decision, the Court held that it is constitutional for the CFPB director to be appointed to a five-year term, removable by the President only for “inefficiency, neglect of duty, or malfeasance in office.”[2]  At the same time, however, the Court affirmed the vacature of a $109 million sanction levied by former CFPB director Richard Cordray against PHH Corporation (“PHH”), a large mortgage lender.[3]

As a result of the Court’s decision, the enforcement action will be remanded back to the CFPB, now under the leadership of Trump Administration-appointee Mick Mulvaney.  The remand comes at a time of substantial uncertainty as to the CFPB’s enforcement prerogatives.  In a leaked email to the entire CFPB staff on January 23, 2018, Mulvaney indicated that the CFPB would no longer “push the envelope” when it comes to enforcing consumer protection laws, and would instead be reviewing “everything that [it] do[es], from investigations to lawsuits and everything in between.”[4]  Indeed, the CFPB has since issued several Requests for Information to encourage public comment as it reviews its policies and processes related to enforcement and civil investigative demands.[5] 


In January 2014, the CFPB initiated an administrative proceeding against PHH and certain affiliates alleging that PHH orchestrated a kickback scheme involving mortgage insurance and reinsurance transactions in violation of the Real Estate Settlement Procedures Act of 1974 (“RESPA”).[6]  The case was tried by an Administrative Law Judge (“ALJ”).  The ALJ concluded that PHH had violated RESPA and ordered PHH to pay disgorgement of $6.4 million.  In accordance with CFPB procedure for administrative enforcement actions, both PHH and the CFPB’s Enforcement Division appealed the ALJ’s Recommended Decision to CFPB Director Cordray.  In his decision, Director Cordray raised the disgorgement amount to approximately $109 million and concluded that only civil, and not administrative, actions were subject to RESPA’s three-year statute of limitations.[7]

PHH appealed the order to the D.C. Circuit Court – the first-ever challenge to the CFPB’s exercise of its administrative enforcement authority.  On October 11, 2016, a three-judge panel unanimously vacated Director Cordray’s order, holding that RESPA allows the reinsurance arrangement PHH employed and that RESPA’s three-year statute of limitations applies in administrative proceedings as well as civil actions.[8]  Additionally, a 2-1 majority held that the CFPB’s structure, in which the director could only be removed by the President for cause, violated the separation of powers doctrine, which generally permits the President under Article II of the Constitution to appoint and terminate executive officers.[9]  The panel’s decision was vacated in full pending rehearing en banc.

Meanwhile, Cordray resigned from the CFBP in November 2017.  Prior to his resignation, Cordray named Leandra English, the CFPB’s Chief of Staff, to serve as the bureau’s Deputy Director, on the theory that she would serve as acting Director until the President nominated and the Senate confirmed a new Director.  Shortly thereafter, President Trump directed Mick Mulvaney, the head of the Office of Management of Budget, to serve as acting Director.  English unsuccessfully sought a temporary restraining order and injunction to remove Mulvaney and install her as acting Director.[10]  The denial of English’s claim for injunctive relief is on expedited appeal in the D.C. Circuit and remains pending.

The En Banc Court’s Reasoning

On the constitutional issue, the en banc Court concluded that Congress’s choice to include a for-cause removal provision did not impede the President’s authority because the removal provision still allows the President to remove the CFPB director for “inefficiency, neglect of duty, or malfeasance in office.”  The Court concluded that the President retains “ample authority” to ensure that the director is competently performing his or her statutory responsibilities, as Supreme Court jurisprudence on separation of powers requires.[11]  The Court observed that Congress has historically afforded financial regulators a degree of independence from removal, and that the Supreme Court upheld identical for-cause language as constitutional in 1935, when considering a similar challenge to the President’s authority to remove members of the Federal Trade Commission.[12]  Thus, the Court concluded that Congress was within its authority to restrict the President’s ability to remove the CFPB director, reflecting “its permissible judgment that civil regulation of consumer financial protection should be kept one step removed from political winds and presidential will.”[13]

The Court’s decision did not address its reasons for reinstating the panel’s vacature of the enforcement order against PHH.  However, a concurring opinion makes clear that the entire court agreed that Director Cordray’s failure to give notice to PHH before increasing the disgorgement penalty by more than $100 million violated PHH’s due process rights.[14]


By reinstating the panel’s vacature of the enforcement order and accepting PHH’s due process claim, the Court confirmed the judiciary’s role in overseeing the actions of administrative agencies, including the CFPB.  More importantly, the Court’s decision confirms that CFPB enforcement proceedings must contain certain due process rights, although the scope of those rights remains uncertain.  At the same time, the decision preserves a structure that concentrates authority in a single politically-insulated individual, leading to potentially large swings in CFPB enforcement priorities and policies, and possibly contradicting the policy objectives of the President under which the director is serving.  While an appeal to the U.S. Supreme Court remains possible, the PHH decision ensures – at least for the foreseeable future – that the CFPB will remain the only financial regulatory agency headed by a single person who cannot be fired by the President at will.

[1] PHH Corp., et al. v. Consumer Fin. Protection Bureau, No. 15-01177 (D.C. Cir., Jan. 31, 2018), available at https://www.cadc.uscourts.gov/internet/opinions.nsf/B7623651686D60D585258226005405AC/$file/15-1177.pdf.

[2] Id. at 17.

[3] Id.

[4] Email from Mick Mulvaney, Acting Dir., Consumer Fin. Protection Bureau, to _DL_CFPB_AllHands (Jan. 23, 2018, 12:59 p.m. EST), available at https://www.documentcloud.org/documents/4357880-Mulvaney-Memo.html.

[5] Notice and Request for Information, Docket No. CFPB-2018-0003 (Consumer Fin. Protection Bureau Feb. 6, 2018), available at http://files.consumerfinance.gov/f/documents/cfpb_rfi_enforcement-processes_022018.pdf; Notice and Request for Information, Docket No. CFPB-2018-0001 (Consumer Fin. Protection Bureau Jan. 18, 2018), available at http://files.consumerfinance.gov/f/documents/cfpb_rfi_civil-investigative-demands_012018.pdf.

[6] See Notice of Charges, In the Matter of:  PHH Corporation, PHH Mortgage Corporation, PHH Home Loans LLC, Atrium Insurance Corporation, and Atrium Reinsurance Corporation, File No. 2017-CFBP-0002 (Consumer Fin. Protection Bureau Jan 29, 2014), available at https://www.consumerfinance.gov/about-us/newsroom/cfpb-takes-action-against-phh-corporation-for-mortgage-insurance-kickbacks/.

[7] PHH Corp., No. 15-01177, slip op. at 15-16 (D.C. Cir., Jan. 31, 2018).

[8] PHH Corp., et al. v. Consumer Fin. Protection Bureau, No. 15-01177, slip. op. at 70-100 (D.C. Cir., Oct. 11, 2016), available at https://www.cadc.uscourts.gov/internet/opinions.nsf/AAC6BFFC4C42614C852580490053C38B/$file/15-1177-1640101.pdf.  In reaching this conclusion, the panel concluded that there was no ambiguity as to whether RESPA permits captive reinsurance arrangements, and thus it did not owe deference to the CFPB’s interpretation of the statute under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).  See id. at 77-79.

[9] Id. at 64.

[10] See English v. Trump et al., No. 17-cv-2534, slip op. at 5-7 (D.D.C., Jan. 10, 2018).

[11] PHH Corp., No. 15-01177, slip op. at 18, 49 (D.C. Cir., Jan. 31, 2018).

[12] Id. at 34 (citing Humphrey’s Executor v. United States, 295 U.S. 602 (1935)).

[13] Id. at 68.

[14] Id. at 18; see also id. at 73 (Tatel, J., concurring).