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Eleventh Circuit Rules that Return of a Certified Mail Receipt Satisfies Regulation X of RESPA
In a per curiam opinion issued on March 1, 2017, the Eleventh Circuit Court of Appeals affirmed the dismissal of a complaint alleging that a mortgage servicer had violated Regulation X of the Real Estate Settlement Procedures Act (“RESPA”) by failing to “correctly or timely acknowledge receipt of his [written request for information (“RFI”)].” See Meeks v. Ocwen Loan Servicing LLC, [Order] No. 16-15536 (11th Cir. Mar. 1, 2017). Regulation X requires that, within five days of receiving an RFI, mortgage servicers must “provide to the borrower a written response acknowledging receipt of the information request.” 12 C.F.R. § 1024.36(c). Plaintiff alleged that the mortgage servicer violated 12 C.F.R. § 1024.36(c) when it signed and sent a Certified Receipt on the same day as receiving the RFI and when it sent a substantive response nine days later. Plaintiff sought actual damages of less than $100 and attorneys’ fees and costs.
The Eleventh Circuit ruled, as a matter of first impression, that the mortgage servicer’s return of the Certified Receipt , which the plaintiff’s attorney “unquestionably received,” satisfied Regulation X. Alternatively, the Court affirmed the district court’s decision because the plaintiff “did not suffer any compensable damages from [the] alleged violation” and plaintiff’s counsel’s notice of error “falsely question[ed] the servicer’s receipt in order to create a claim for damages.” As to the claim for statutory damages, the Eleventh Circuit held that the plaintiff lacked Article III standing because he did not suffer a concrete injury-in-fact. Rather, because the plaintiff (and his attorney) “had undisputed actual knowledge of receipt of the RFI,” plaintiff “suffered at most ‘a bare procedural violation.’”
CFPB Seeks Public Comment on its Plans for Assessing RESPA Mortgage Servicing Rule
On May 4, the CFPB issued a request for comment on its plans for assessing the 2013 Real Estate Settlement Procedures Act (RESPA) servicing rule’s effectiveness in meeting the purposes and objectives outlined in the Dodd-Frank Act, which requires the CFPB to assess each significant rule or order it adopts under Federal consumer financial laws. According to the request for comment and a May 4 blog post on the CFPB’s website, the self-assessment will focus on objectives to ensure that: (i) “[c]onsumers are provided with timely and understandable information to make responsible decisions about financial transactions”; (ii) “[c]onsumers are protected from unfair, deceptive, or abusive acts and practices and from discrimination”; (iii) “[o]utdated, unnecessary, or unduly burdensome regulations are regularly identified and addressed in order to reduce unwarranted regulatory burdens”; (iv) “[f]ederal consumer financial law is enforced consistently”; and (v) “[m]arkets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation.”
In 2013, the Bureau adopted the 2013 RESPA Servicing Final Rule and further amended the rule several times to address questions raised by the industry, consumer advocacy groups, and other stakeholders. The CFPB deemed the 2013 RESPA Servicing Final Rule, effective January 10, 2014, a “significant rule” for purposes of the Dodd-Frank Act. Importantly, however, in Footnote 10 of its most-recent request for comment, the Bureau clarifies that it “is not seeking comment on the amendments to the mortgage servicing rules that became or will become effective after the January 10, 2014 effective date.” (emphasis added) Accordingly, it appears that the Bureau is not presently seeking comments on the Amendments to Regulation X and Regulation Z that the CFPB published as a Final Rule (12 CFR Parts 1024 and 1026) in the October 19, 2016 edition of the Federal Register – see earlier InfoBytes coverage here – and which are slated to take effect in part on October 19, 2017 and in full on April 19, 2018.
PHH v CFPB Update: D.C. Circuit Grants CFPB’s Request to Go Last at May 24 En Banc Oral Arguments
In an per curium order handed down on May 1, the U.S. Court of Appeals for the D.C. Circuit granted an uncontested motion brought by the CFPB seeking to revise the order of the oral arguments in the upcoming PHH Corp. v. CFPB hearing before the en banc court. With all briefing on the merits having been submitted, the case awaits oral arguments, which have been set for May 24. The Bureau sought to change the order of arguments such that the CFPB presented its argument last—after both PHH and the DOJ. In seeking a change in scheduling order, the CFPB argued that the original schedule—pursuant to which the DOJ would go last—did not afford the Bureau an opportunity to respond to the DOJ’s arguments. The Court’s May 1 Order, having granted the Bureau’s Motion, provides for the following argument order:
- Petitioners (PHH Corp.) – 30 minutes
- Amicus Curiae United States – 10 minutes
- Respondent (CFPB) – 30 minutes
Also, note that the CFPB’s motion agrees-in-advance to PHH to likewise respond to both the DOJ and CFPB, should it wish to do so.
As previously discussed in InfoBytes, the once-cooperative relationship between the CFPB and the DOJ recently turned adverse after the Sessions-led DOJ presented arguments in its latest briefing that differed markedly from both the CFPB’s positions and from the arguments asserted in briefing submitted by the Obama Administration in December 2016. For additional background, please see our recent PHH Corp. v CFPB Case Update.
PHH Submits Reply Brief in Case Against CFPB; DOJ Allocated 10 Minutes at May 24 Oral Argument
As recently covered by InfoBytes, on March 31 the CFPB and seven amicus curiae respondents each filed briefing in PHH Corp. v CFPB urging the D.C. Circuit to uphold the constitutionality of the Bureau’s single-director, independent-agency structure. On April 10, PHH filed a reply brief responding to the arguments raised by the CFPB and other respondents, and reiterating its position that, among other things, the en banc court should declare that the Dodd-Frank Act’s creation of the CFPB violated constitutional separation of powers requirements and that the only satisfactory remedy is the complete invalidation of the Bureau.
Citing Myers v. United States, 272 U.S. 52 (1926), PHH contends that, “the Constitution does not permit Congress to assign any portion of the executive power to an ’independent’ officer who is not accountable to, and removable by, the President.” Id. at 113. Moreover, in addressing comparisons between the CFPB and the FTC, the mortgage lender’s reply argues that “[t]he CFPB’s broad executive, legislative, and adjudicative authority further refutes its claim that it is functionally ‘indistinguishable’ from the FTC in 1935” because, among other reasons, “[i]n 1935, the FTC had no substantive rulemaking powers—the FTC disclaimed that authority until 1962.” In support of this claim, PHH highlights the fact that “the CFPB has all the authority—and more—of a cabinet department such as Treasury or Justice” but “unlike most cabinet positions, the Director may unilaterally appoint every subordinate official in the agency, as well as hire and compensate all CFPB employees outside the normal competitive-service requirements” (emphasis added). In addition to addressing the constitutional issue, PHH’s reply brief also notes that the CFPB has offered no support for its effort to enforce a reinterpretation of the Real Estate Settlement Procedures Act against the companies.
Oral argument is scheduled for May 24. As provided in a Per Curiam Order issued on April 11, the Court has allocated 30 minutes per side for the argument and an additional ten minutes of argument for the United States as amicus curiae. For additional background, please see our recent PHH Corp. v CFPB Case Update.
Case Update: PHH Corp. v CFPB
March 31 marked the deadline for the CFPB to file its brief in response to PHH Corporation in the U.S. Court of Appeals for the District of Columbia Circuit’s en banc review of the CFPB’s enforcement action against PHH for alleged violations of the Real Estate Settlement Procedures Act (RESPA). As previously covered by InfoBytes, the PHH case began as a challenge to a 2015 penalty the CFPB levied against PHH, which was collected as part of what the CFPB deemed – a “captive reinsurance arrangement.” In fighting the penalty, PHH called into question the Bureau’s constitutionality and in October 2016, a panel of the D.C. Circuit concluded both that the CFPB misinterpreted RESPA, and also that its single-Director structure violated the constitutional separation of powers. On February 16 of this year, however, the D.C. Circuit granted the CFPB’s petition for rehearing en banc of the October 2015 panel decision. In granting en banc review, the court sought guidance from the parties on three specific questions:
- Is the Bureau’s structure unconstitutional because its Director may be removed only for cause, and if so, is the appropriate remedy to sever the for-cause removal provision from the Consumer Financial Protection Act?;
- May the Court avoid addressing the constitutionality of the Bureau’s structure if it adopts the panel’s holdings as to PHH’s liability under RESPA (and should it adopt those holdings)?; and
- What is the appropriate disposition of this case if this Court concludes that the SEC’s administrative law judges are “inferior officers” under Lucia v. SEC?
Oral argument is scheduled for May 24. This Court has allocated 30 minutes per side for the argument and, as discussed further below, the Department of Justice (DOJ) has filed an unopposed motion seeking ten minutes of argument time for the United States at the May 24 en banc hearing.
CFPB’s Brief. On March 31, the CFPB filed its brief for the en banc rehearing in PHH Corp. v CFPB urging the D.C. Circuit to uphold the constitutionality of the Bureau’s single-director, independent-agency structure. According to the CFPB, neither the Bureau’s current single-director arrangement, nor the “for-cause” restriction on the President’s removal powers prevents the Executive branch from ensuring that the nation’s laws are implemented. Specifically, the brief explains that “[t]he President has no less control over a single-director agency than he does over a multi-member commission.” The brief also sets forth the Bureau’s position that, even “[i]f this Court determines that the Bureau’s structure is unconstitutional,” the appropriate remedy is not to invalidate the agency in its entirety, but rather to “sever the for-cause removal provision” of the Dodd-Frank Act (the Act), thereby allowing the President to remove the Bureau’s director for any reason. In addition to addressing the constitutional question, the CFPB also reiterated its argument that its RESPA interpretation is correct, that PHH and its affiliates violated RESPA, and that the Act’s statute of limitations does not apply to the Bureau’s administrative enforcement authority. And, at the direction of the court, the brief also addressed the potential effect of a decision in Lucia v. SEC that a SEC administrative law judge (ALJ) was an inferior officer under the Constitution. The ALJ used by the CFPB in the PHH enforcement proceeding was, in fact, borrowed from the SEC. Notably, Lucia v. SEC is scheduled to be argued immediately before PHH Corp. v. CFPB, on May 24, 2017.
Amicus Curiae in Support of the CFPB. Also filed on March 31 were seven amicus curiae briefs, each of which offered arguments, both legal and non-legal, in favor of the CFPB’s continued existence as an independent regulator:
- Brief on Rehearing en banc of Amici Curiae State Attorneys General of the States of Connecticut, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, Mississippi, New Mexico, New York, North Carolina, Oregon, Rhode Island, Vermont and Washington, and the District Of Columbia in Support of Respondent
- Brief on Rehearing en banc of Current and Former Members of Congress as Amici Curiae in Support of Respondent
- Brief on Rehearing en banc of Amici Curiae Public Citizen, Inc., Consumer Federation of America, Consumers Union, National Association of Consumer Advocates, National Consumer Law Center, and Tzedek DC in Support of Respondent
- Brief of Americans For Financial Reform, California Reinvestment Coalition, Center for Responsible Lending, Consumer Action, Demos, Housing and Equal Rights Advocates, Leadership Conference on Civil and Human Rights, National Community Reinvestment Coalition, National Council of La Raza, National Fair Housing Alliance, Self-Help Credit Union, United States Public Interest Research Group Education Fund, Inc., and Woodstock Institute, as Amici Curiae in Support of Respondent
- Brief on Rehearing en banc of Separation of Powers Scholar as Amici Curiae in Support of Respondent
- Brief on Rehearing en banc of Amici Curiae Financial Regulation Scholars as Amici Curiae in Support of Respondent
- Brief on Rehearing en banc of AARP and AARP Foundation as Amici Curiae in Support of Respondent
PHH’s Brief. Briefing for PHH and amicus curiae briefs in support of the mortgage lender were due on March 17. In its opening brief and addendum, PHH focused on the separation-of-powers and remedy issues, raising the RESPA interpretation issue principally in support of the claim that the CFPB’s unconstitutional structure rendered the Bureau dangerously unaccountable. The New Jersey mortgage lender noted, among other things, that Congress has no ability to cut the agency’s budget and the President cannot remove its director without cause. As a general matter, the mortgage lender has argued that the Bureau’s creation “placed massive, unchecked federal power in the hands of a single, unaccountable director” and that “[t]he director alone rules over large swaths of the field of consumer finance, subject to virtually no restraints from the representative branches.”
DOJ Brief. As previously covered by InfoBytes, the DOJ filed its own brief in the case on March 17, arguing in support of the D.C. Circuit panel’s initial ruling and proposed remedy. The DOJ brief stated, among other things, that, “[w]hile we do not agree with all of the reasoning in the panel’s opinion,” the DOJ agrees with the panel’s conclusion that “a removal restriction for the Director of the CFPB is an unwarranted limitation on the President’s executive power” and that “the panel correctly concluded … that the proposed remedy for the constitutional violation is to sever the provision limiting the President’s authority to remove the CFPB’s Director, not to declare the entire agency and its operations unconstitutional.” As covered recently on InfoBytes, the DOJ presented arguments that differed both from the CFPB and from the positions previously presented by the Obama Administration in briefing submitted on behalf of the United States back in December.
Also, as mentioned above, on April 3, the DOJ filed an unopposed motion seeking ten minutes of argument time for the United States at the May 24 en banc hearing.
Amicus Curiae in Support of PHH. The March 10 deadline in the en banc proceeding also brought about the filing of seven amicus curiae briefs in support of PHH’s claims and/or defenses. Six of these filings took the position that the Bureau’s current structure violates separation-of-powers principles:
- Brief on Rehearing en banc of the Chamber of Commerce of the United States of America as Amicus Curiae in Support of Petitioners
- Brief on Rehearing en banc of ACA International as Amicus Curiae in Support of Petitioners
- Brief on Rehearing en banc of the Cato Institute as Amicus Curiae in Support of Petitioners
- En Bank Brief of Amici Curiae RD Legal Partners, LP, RD Legal Funding, LLC, RD Legal Finance, LLC and Roni Dersovitz in Support of Petitioners
- State National Bank of Big Spring, 60 Plus Association, Inc.; and Competitive Enterprise Institute as Amici Curiae in Support of Petitioners
- Brief for the States of Missouri, Alabama, Arizona, Arkansas, Georgia, Idaho, Indiana, Kansas, Louisiana, Nevada, Oklahoma, South Dakota, Texas, West Virginia, and Wisconsin as Amici Curiae in Support of Petitioners
A seventh—filed by a combined group of 13 banking and residential real estate-related organizations—argued in support of the company’s interpretation of the RESPA. According to this brief, the CFPB incorrectly changed a long-standing RESPA interpretation that permitted the use of captive reinsurance companies under appropriate circumstances. The changed interpretation was contrary to the Act and to the CFPB’s own regulation. The brief also argued that the Bureau improperly changed the interpretation and applied the new interpretation in an enforcement action without proper notice.
Trump Administration Files Brief in PHH Corp. v. CFPB
On March 17, the Trump Administration’s Department of Justice (“DOJ”) filed its amicus brief in the D.C. Circuit’s en banc review of the CFPB’s enforcement action against PHH Corporation for alleged violations of the Real Estate Settlement Procedures Act (“RESPA”). In October 2016, a panel of the D.C. Circuit concluded that the CFPB misinterpreted RESPA and that its single-Director structure violated the constitutional separation of powers. The DOJ brief states that, “[w]hile we do not agree with all of the reasoning in the panel’s opinion,” the DOJ agrees with the panel’s conclusion that “a removal restriction for the Director of the CFPB is an unwarranted limitation on the President’s executive power” and that “the panel correctly concluded … that the proposed remedy for the constitutional violation is to sever the provision limiting the President’s authority to remove the CFPB’s Director, not to declare the entire agency and its operations unconstitutional.”
Like the brief filed in this case by the Obama Administration DOJ before the change in administration, the current DOJ brief states that “[t]he United States takes no position on the statutory issues in this case, but in the event that the ultimate resolution of those issues results in vacatur of the CFPB’s order [against PHH], it is within this Court’s discretion to avoid ruling on the constitutional question.” However, the brief goes on to state that, because the issue is already before the en banc court and the “question is likely to recut in pending and future cases, it would be appropriate for the Court to provide needed clarity by exercising its discretion to resolve the separation-of-powers issue now.”Two Trade Associations File Notices of Intent to Submit Amicus Briefs in PHH v. CFPB
On March 8 and 9, two separate Notices of Intention to Participate as Amicus Curiae were filed in PHH Corp. v. CFPB. The first was filed by ACA International, a trade association for the credit and collections industry. The second was filed on behalf of the following parties: American Bankers Association; American Escrow Association; American Financial Services Association; Consumer Bankers Association; Credit Union National Association; Housing Policy Council of the Financial Services Roundtable; Independent Community Bankers of America; Leading Builders of America; Mortgage Bankers Association; National Association of Federally- Insured Credit Unions; National Association of Home Builders; National Association of REALTORS; and Real Estate Services Providers Council. Nearly all of the associations listed above filed either joint or separate amici briefs at the panel stage and believe that “the en banc Court will be aided by a brief addressing how the Bureau’s Order not only contravenes RESPA’s statutory text, governing regulations, and applicable policy statements, but also how the Order’s violation of fair-notice principles disrupts the critically important home-lending market.”
Trump Administration Given March 17 Filing Date for Amicus Brief in PHH v CFPB; Requests to Intervene by Outside Organizations Denied by D.C. Circuit
On March 7, the U.S. Court of Appeals for the D.C. Circuit granted the United States’ unopposed motion, filed through the Office of the Solicitor General (“SG”), which requested an extension to file its amicus brief in PHH Corp. v. CFPB. Notably, amicus briefs supporting PHH must be filed by March 10 and those supporting the CFPB must be filed by March 31. The fact that the United States’ motion requested an extension until March 17—before the deadline for briefs supporting the CFPB—signals that the SG may present arguments supporting PHH that differ both from the CFPB and from the positions previously presented by the Obama Administration in briefing submitted on behalf of the United States back in December.
As previously covered in InfoBytes, late last year the D.C. Circuit invited briefing by the SG’s office on behalf of the United States (note that the SG does not represent the CFPB; the Bureau is legally permitted to litigate on its own behalf.) The then Obama-led SG’s office took the position that the case should be reheard by the en banc court because, among other reasons, (i) the majority’s reasoning misapplied Supreme Court precedent on separation of powers issues and/or (ii) the panel majority should not have reached the constitutional issue. Now under the Trump Administration, the DOJ hinted that it may revise its positions with respect to both the constitutionality of the CFPB’s single-director-removable-only-for-cause structure, and, if it chooses, the merits of PHH’s argument that the Bureau’s RESPA interpretation was incorrect. Indeed, the short motion asserted, among other things, that “the views of the United States on matters involving the President’s removal power are not always entirely congruent with the views of independent agencies.”
Also on March 7, the D.C. Circuit issued a separate order denying three pending “motions and alternative requests” seeking to intervene, or in the alternative, hold in abeyance requests to intervene submitted by the Democratic Ranking Members of the Senate and House Committees with jurisdiction over the CFPB, 16 State Attorneys General, a coalition of consumer interest groups, and two conservative advocacy groups working with State National Bank of Big Spring.
Special Alert: D.C. Circuit Grants Petition For Rehearing in PHH v. CFPB; Vacates Judgment Based on Bureau’s Unconstitutionality
Buckley Sandler Special Alert
On February 16, the U.S. Court of Appeals for the D.C. Circuit granted the CFPB’s petition for rehearing en banc of the October 2015 panel decision in CFPB v. PHH Corporation. Among other things, the panel decision declared the Bureau’s single-Director structure unconstitutional and would have allowed the President to remove the CFPB’s Director at will rather than “for cause” as set forth in the Dodd-Frank Act. As a result of the petition for rehearing being granted, the panel’s judgment is vacated and the full D.C. Circuit will hear PHH’s appeal of the $109 million penalty imposed by the CFPB under the anti-kickback provisions of the Real Estate Settlement Procedures Act (RESPA). Oral argument is scheduled for May 24, 2017.
As discussed in detail in our prior alert, the October panel decision unanimously concluded that the CFPB misinterpreted RESPA, violated due process by disregarding prior interpretations of the statute and applying its own interpretation retroactively, and failed to abide by RESPA’s three-year statute of limitations. However, only two of the three judges on the panel concluded that the CFPB’s status as an independent agency headed by a single Director violated the separation of powers under Article II of the U.S. Constitution. The third panel member, Judge Henderson, dissented from this portion of the opinion on the grounds that it was not necessary to reach the constitutional issue because the panel was already reversing the CFPB’s penalty on other grounds.
Click here to read full special alert
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If you have questions about the decision or other related issues, visit our Consumer Financial Protection Bureau practice for more information, or contact a BuckleySandler attorney with whom you have worked in the past.
Intervention by Lawmakers in PHH Case Denied by D.C. Circuit
On February 2, a federal appeals court in Washington, D.C., in a brief order, denied a motion by the Democratic Ranking Members of the Senate and House Committees with jurisdiction over the CFPB to intervene in PHH Corp. v. CFPB. The order also denied similar motions submitted by 16 state attorneys general and a coalition of interest groups. As previously covered on InfoBytes, the court is still considering a petition by the Bureau for rehearing an October ruling that said CFPB Director Richard Cordray may be removed by the president without cause.