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Democratic state AGs seek to intervene in PHH appeal

Posted in CFPB Enforcement, State Enforcement

The Democratic Attorneys General of 16 states and the District of Columbia have filed a motion with the D.C. Circuit seeking to intervene in the PHH appeal.  The states are Connecticut, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Mississippi, New Mexico, New York, North Carolina, Oregon, Rhode Island, Vermont, and Washington.

According to the AGs, they had little reason to intervene when PHH originally filed its appeal in June 2015 because the CFPB then had an independent Director and was fully committed to defending the CFPB’s constitutionality.  They assert that the situation has changed due to the Presidential election, with President Trump having expressed strong opposition to Dodd-Frank reforms and media reporting that he is considering the removal of Director Cordray as soon as possible.  More specifically, they claim that the new Administration “has indicated that it may not continue an effective defense of the statutory for-cause protection of the CFPB director” and “[a] significant probability exists that the pending petition for rehearing will be withdrawn, or the case otherwise rendered moot, in a way that directly prejudices the interests of the State Attorneys General and the citizens of the States that they represent.”

The AGs argue that they satisfy the standard for intervention on appeal as of right because:

  • Although a motion to intervene must be filed within 30 days after a petition for review is filed, the motion is timely because the court has discretion to extend the deadline for good cause.  Such cause exists because there was no reason for the AGs to believe until after the presidential election “that their interests would not be represented in full.”
  • They have a legally protected interest in the litigation based on their role in enforcing consumer protection laws.  The AGs claim that because the CFPA requires a state AG to notify the CFPB when the AG is using his or her Section 1042 authority to enforce the CFPA and allows the CFPB to intervene as a party, “[r]emoval of the Director’s independence as a result of this Court’s ruling would…effectively giv[e] the President veto power over the State Attorneys’ General enforcement of the CFPA.”  They also note that because the CFPA directs the CFPB to coordinate regulatory actions with state AGs, the D.C. Circuit’s ruling threatens the AGs’ ability to bring coordinated regulatory actions “free from political influence and interference.”
  • If the CFPB chooses to no longer defend the case, the interests of the state AGs and state citizens will be seriously impaired because by “permitting the immediate termination of the Director at will,” the panel’s decision not only compromises the CFPB’s independence but also “will likely derail pending policy initiatives and enforcement actions and possibly call into question the validity of past initiatives.”
  • Because “[t]here is reason to believe that the new administration will not maintain its defense of the CFPB,” the interests of the state AGs are unlikely to be adequately represented by the executive branch.

The AGs also argue in the alternative that they satisfy the requirements for permissive intervention because, in arguing like the CFPB and United States that the D.C. Circuit’s constitutionality ruling is wrong, they “would have a defense that would share a common question of law with the main action.”

Since the AGs indicate in their motion that they do not intend to file additional briefs unless the D.C. Circuit “orders briefing for the en banc proceedings,” the motion seems unlikely to significantly delay a ruling on the CFPB’s petition for en banc rehearing.  Pursuant to the D.C. Circuit’s order granting PHH’s motion for leave to file a supplemental response to the CFPB’s petition, PHH must file its supplemental response by January 27.  Presumably, the D.C. Circuit will rule on the petition soon thereafter.