United States

Courts rule in favor of CFPB’s structure, against RESPA interpretation


The D.C. Circuit Court concluded that the Consumer Finance Protection Bureau’s (CFPB or Bureau) structure is constitutional, although its interpretation of the Real Estate Settlement Procedures Act (RESPA) is wrong. The CFPB’s single director structure had previously been called into question as unconstitutional because it prevented the president from acting on the “take care clause.”  The clause states that, although the execution of laws can be delegated, the duty to make sure that they are faithfully executed falls to the president. In the courts’ conclusion, however, it was found that not only were the means used to grant the Bureau independence approved by the Supreme Court and not in conflict with the Constitution, but that it was also consistent with historical practices to grant financial regulators independence. Furthermore, it dismissed concerns around the accountability of the CFPB director and the challenged removal restrictions. 

The court also reinstated portions of RESPA that were removed during the PHH Corporation v CFPB case in 2015, which permit captive mortgage reinsurance arrangements. The CFPB’s interpretation was revised in 2015. During that time, it was determined that captive mortgage insurance arrangements were prohibited, which was a departure from the HUD’s previous interpretation. On Jan. 31, 2018, the panel ruled that the new statute was unclear and allowed the types of payments that the 2015 revision prohibited. The ruling also denied the Bureau’s attempt to retroactively apply the new interpretation to occurrences prior to its publication, considering it a violation of due process. The CFPB unsuccessfully argued that the statute of limitations should not apply to Bureau administrative action, which was also denied and reinstated RESPA’s three-year statute of limitations.