PHH's challenge to CFPB constitutionality officially dead

The mortgage company has decided not to pursue its case against the regulator to the Supreme Court

PHH's challenge to CFPB constitutionality officially dead

PHH Corp’s challenge to the constitutionality of the Consumer Financial Protection Bureau is officially dead.

The mortgage company had brought a case against the agency, arguing that the CFPB’s single-director structure was unconstitutional. However, a federal appeals court rejected that argument, and PHH has decided not to appeal the case to the Supreme Court, The Wall Street Journal reported.

The case began in 2015, when then-CFPB Director Richard Cordray ordered PHH to pay a $109 million fine for alleged servicing violations. PHH appealed the fine and challenged the constitutionality of the agency’s single-director structure, saying it made the agency unaccountable and violated the Constitution’s separation of powers.

PHH prevailed initially, with the US Appeals Court for the District of Columbia agreeing that the CFPB’s structure was unconstitutional. The CFPB, however, appealed that ruling to the full appeals court, and in January it ruled that the agency’s structure was constitutionally acceptable. PHH was handed a partial victory, however, with the court invalidating the $109 million fine.

PHH could have appealed that ruling to the US Supreme Court. However, a PHH spokesman confirmed to WSJ that the company had decided to let the May 1 deadline pass without filing an appeal.

The case had become something of a proxy war in the continuing battle between Democrats and Republicans over regulatory reform. Republicans argued that the agency’s director, who could be fired only for cause, was essentially unaccountable to the rest of the government and therefore wielded nearly limitless power.

Democrats, meanwhile, argued that the director of the CFPB needed the freedom to operate in the best interests of consumers without being swayed by political winds.