The Consumer Financial Protection Bureau on Thursday dropped its long-running case against PHH Corp., the mortgage company whose appeal of a $109 million penalty set off an ultimately unsuccessful challenge to the bureau’s independent, single-director leadership structure.
The dismissal comes fives months after a Washington federal appeals court upheld the CFPB’s power structure as constitutional but tossed the penalty against Mount Laurel, New Jersey-based PHH, sending the case back to the bureau for further review under the Real Estate Settlement Procedures Act, or RESPA.
PHH elected not to petition the Supreme Court to review the decision from the U.S. Court of Appeals for the D.C. Circuit, where it had been represented by Gibson, Dunn & Crutcher partner Ted Olson.
With the case returned to the CFPB, the decision on whether to press forward fell to the bureau’s Trump-appointed interim director, Mick Mulvaney. In May, about a week after PHH’s deadline to petition the Supreme Court passed, Mulvaney asked a CFPB enforcement team and PHH’s defense lawyers to file a joint statement about further proceedings in the case.
The two sides responded this week with a request for Mulvaney to dismiss the case.
“They jointly agreed to recommend dismissal of this matter. I accept that recommendation,” Mulvaney wrote Thursday. John Czwartacki, the CFPB’s chief communications officer, described the dismissal Thursday as a “matter of housekeeping.”
“Earlier this year the [D.C. Circuit] largely dismissed the legal arguments the bureau had been making in this case. The court left open some issues that the bureau determined to resolve through dismissal rather than continued litigation,” he said. “This dismissal just ends this embarrassing chapter that was premised on then-Director [Richard] Cordray’s questionable legal theories, which never should have been pursued, and that the D.C. Circuit rightly rejected in January.”
PHH said in a statement:
“We are extremely gratified to have this matter fully resolved as a result of Acting Director Mulvaney’s decision to dismiss this case. Today’s order is consistent with our long-held view that we complied with RESPA and other laws applicable to our former mortgage reinsurance activities in all respects.”
In his months leading the CFPB, Mulvaney has signaled a softer enforcement approach, declaring an end to the days of “pushing the envelope.” In dismissing the PHH case on Thursday, Mulvaney closed an enforcement action that many of the CFPB’s critics cited as a prime example of the bureau’s aggressive tack.
His dismissal of the PHH case could fuel criticism that he is defanging the bureau. Indeed, under Mulvaney’s watch, the CFPB has halted investigations and abandoned a case against the payday lender Golden Valley Lending.
But the joint statement recommending dismissal was signed by career officials, including Kristen Donoghue, who was named the bureau’s enforcement chief late in Cordray’s tenure.
For the CFPB, the dismissal puts the PHH case in the past. But, as Republicans in Congress continue to consider reforming the CFPB’s structure, the bureau is facing separate constitutional challenges in two other federal appeals courts.
In the U.S. Court of Appeals for the Fifth Circuit, the CFPB is set to once again face Olson, who has signed on to represent All-American Check Cashing in its challenge to the bureau’s constitutionality.
In the U.S. Court of Appeals for the Ninth Circuit, the firm Seila Law LLC is contesting the CFPB’s constitutionality in its effort to strike down an administrative subpoena, known as a civil investigative demand, it received from the agency.