In October, a three-judge panel of the United States Circuit Court for the District of Columbia dealt a blow to the burgeoning power of the Consumer Financial Protection Bureau. The court held that the structure of the bureau’s single director is unconstitutional if that director can only be removed for cause. It also rejected the CFPB’s interpretation of RESPA, which departed from earlier interpretations, to prohibit captive mortgage re-insurance arrangements such as the one at issue in the case. Finally, the court also held that even if the CFPB’s interpretation of RESPA was correct, its attempt to retroactively apply its new interpretation violated due process.
Last week, as expected, the CFPB filed a petition requesting another hearing of the case by the full court, or en banc. In the petition, the bureau claims the panel’s ruling “set up what may be the most important separation-of-powers case in a generation.” Citing McCulloch v. Maryland, the petition claims the case presents “an issue of exceptional importance because it unduly limits Congress’ flexibility to respond to ‘the various crises of human affairs” by creating independent administrative agencies headed by a single director. The CFPB points out that there are other agencies headed by a single director removable only for cause, such as the Social Security Administration, the Federal Housing Finance Agency, and the Office of Special Counsel.” Because the separation of powers ruling conflicts with U.S. Supreme Court precedent, the CFPB argues, it should be reconsidered by the full court.
The CFPB also argued that D.C. Circuit’s RESPA ruling should be reviewed by the court sitting en banc because it was based on errors of statutory construction and “fundamentally defeats the statutory purpose.” Observing that the court’s holding on retroactive application “is perhaps not worthy of en banc review on its own,” the CFPB nevertheless asks for an opportunity to address the holding because it “may have been based on the panel’s misinterpretation of section 8 of RESPA.”
Although the D.C. Circuit also rejected the CFPB’s argument that statutes of limitations do not apply to its administrative enforcement actions, the CFPB has not asked for reconsideration en banc of this ruling, meaning that Bureau has presumably agreed that going forward, it will be subject to the same statute of limitations in administrative proceedings as would apply to it in a lawsuit filed in court.