Pub. 12 2017-2018 Issue 6

NEBRASKA BANKERS ASSOCIATION 13 Fully registered Dealer Bank • Not FDIC Insured • No Bank Guarantee • May Lose Value FROM ONE COMMUNITY BANK TO ANOTHER. We have delivered fixed income strategies and support to banks of all sizes since 1985. Operating in over 30 states, the Capital Markets Group is always ready to meet the needs of our fellow community bankers. We keep investing simple so that banks can focus on what really matters — lending to the communities who support us. • Portfolio Strategy, Sales and Service • Bond and Securities Underwriting/Trading • BancPath® and FlexLoan® via Asset Management Group We speak the same language. The new decision (all 250 pages of it) is focused almost entirely on the constitu- tional issues associatedwith the structure of the CFPB and the basis on which the director can be dismissed. Essentially, the majority opinion finds that the con- stitutionality of the CFPB is supported by U.S. Supreme Court precedent from 80 years ago upholding the constitutionality of the Federal Trade Commission (FTC). The opinion is a nice example of how the checks and balances in our constitutional system are applied and of the importance of the judiciary in that process. As with the CFPB itself, the decision may spark some passionate debate. Even within the decision, some of the positions are staked out in strong terms. One of the dissents, for example, begins with: “To prevent tyranny and protect individual liberty, the Framers of the Constitution . . .” The focus of this article will be a little less apocalyptic: the future of the republic probably does not hang in the balance here. The decision is nonetheless of considerable importance to bankers. The CFPB filed a notice of charges against PHH in 2014 for violation of the Real Estate Settlement Procedures Act (RESPA) anti-kickback rules. At issue were payments made to PHH’s captive mortgage re-insurance company. The administrative law judge (borrowed from the Securities & Exchange Commission, or SEC) initially recommended a dis- gorgement of $6.4 million. On reconsid- eration by the director of the CFPB, this was upped to more than $100 million. There was a lot going in the case, includ- ing questions about how RESPA should be interpreted and whether the CFPBwas retroactively changing the government’s prior interpretations. Also in contention was the question of whether the CFPBwas subject to RESPA’s three-year statute of limitations. The CFPB’s view that it was not subject to the statute of limitations was part of why PHH found itself facing more than $100 million in disgorgement rather than a mere $6.4 million. 6 The D.C. Circuit’s original three-judge panel decision rejected the CFPB’s view. Among other things, 7 the court stated: Of course, there is good reason Congress did not say that the CFPB need not comply with any statutes of limitations when enforcing the Real Estate Settlement Procedures Act administratively. That would be absurd. Why would Congress allow the CFPB to bring admin- istrative actions for an indefinite period, years or even decades after the fact?Why would Congress cre- ate such a nonsensical dichotomy between CFPB court actions and CFPB administrative actions? The CFPB has articulated no remotely plausible reason why Congress would have done so. The absurdity of the CFPB’s po- sition is illustrated by its response to a hypothetical question about the CFPB’s bringing an admin- istrative enforcement action 100 years after the allegedly unlaw- ful conduct. Presented with that question, the CFPB referenced its prosecutorial discretion. But “trust us” is ordinarily not good enough. . . . The CFPB also suggested that . . . “a court would look askance at a proceeding” initiated 100 years after the challenged conduct oc- curred. . . . We need not wait for an enforcement action 100 years after the fact. This Court looks askance now at the idea that the CFPB is free to pursue an admin- istrative enforcement action for an Counselor’s Corner — continued on page 16