A new decision and order from Director Kraninger that, with minor changes, strictly enforces another CFPB civil investigative demand is a further indication that the CFPB’s enforcement activities remain robust under her leadership.  The new order and decision follows five decisions and orders issued by Director Kraninger on April 25 in which she also, with minor changes, strictly enforced five CIDs.

Like her April 25 orders, Director Kraninger granted the petition to modify or set aside the CID as to its challenge to the sufficiency of the CID’s notification of purpose but only as to that challenge.  As she did in her April 25 decisions and orders, Director Kraninger modified the notification consistent with the Bureau’s April 23 announcement that it would provide more specific information in CID notifications of purpose but denied the petition as to all other challenges.

The challenges rejected by Director Kraninger were:

  • The Bureau did not have statutory authority to investigate the petitioner’s business. The CFPB’s modified notification of purpose states that the purpose of the Bureau’s investigation “is to determine whether providers of tax debt relief products or services are offering or providing financial advisory services to consumers on individual financial matters.” The petitioner argued that it is not a “covered person” subject to the Bureau’s enforcement authority because it does not provide a “financial product or service.”  Specifically, it denied that it provides “financial advisory services” which the CFPA expressly identifies as a “financial product or service.”  In rejecting this argument, Director Kraninger called the petitioner’s assertions “fact-based arguments about whether it is subject to substantive provisions of the CFPA.”  She stated that the Bureau “is not required to accept as true [the petitioner’s] factual assertions concerning the limits or scope of its business conduct and may investigate whether it has enforcement authority over [the petitioner].”
  • Even if the Bureau can conduct some investigation, the investigation should initially be limited to investigating whether the petitioner’s business is subject to the Bureau’s enforcement authority.  In rejecting this argument, Director Kraninger stated that the argument “ignores the longstanding line of decisions approving simultaneous agency investigation of jurisdictional facts and possible violations.”

Consumer advocates have heavily criticized Director Kraninger and former Acting Director Mick Mulvaney for taking a much less aggressive attitude towards enforcement than former Director Cordray.  While there are fewer lawsuits and consent orders under the Kraninger/Mulvaney leadership than under the Cordray leadership, the CFPB’s enforcement activities are still quite robust as exemplified by the five decisions and orders issued by Director Kraninger on April 25 in which she, with minor changes, strictly enforced five separate CFPB civil investigative demands (CIDs).  These decisions and orders largely flew under the radar until Jeff Ehrlich, CFPB Deputy Enforcement Director, mentioned them on May 20 in Chicago when he spoke at the PLI 24th Annual Consumer Financial Services Institute, which I co-chaired.

On April 23, the CFPB announced that in an effort to provide more transparency to CID recipients, it would provide more specific information in CID notifications of purpose.  Director Kraninger’s April 25th decisions and orders granted those petitions to modify or set aside the CIDs that included a challenge to the sufficiency of the CID’s notification of purpose but only as to that challenge.  (Her decisions and orders modify the notifications consistent with the Bureau’s April 23rd announcement.)  However, Director Kraninger denied those petitions as to all other challenges and fully denied the petitions that did not include such a challenge.

The five decisions and orders consist of the following:

  • In re Fastbucks
    • The CID’s original notification of purpose stated that the CID had been issued “to determine whether small-dollar lenders or other persons (1) in connection with the advertising, marketing, offering, provision, servicing, documentation or collection of loan applications or loans have engaged in unfair, deceptive or abusive practices in violation of [the CFPA] or have violated the [ECOA] or the [FCRA], or (2) in connection with maintaining records or providing information for a Bureau investigation have violated [sections 1031 and 1036 of the CFPA].
    • The modified notification states that the purpose of the investigation “is to determine whether small-dollar lenders or associated persons, in connection with  extending or servicing small-dollar loans or collecting debts, have (1) made harassing debt-collection calls to consumers’ workplaces in a manner that is unfair, deceptive, or abusive in violation of [the CFPA] (2) failed to maintain and preserve records in a manner that violates [Reg. B, principally section 1002.12]; (3) failed to follow the requirements for providing disclosures to consumers in a manner that violates the [FCRA, principally sections 1681g, 1681m]; or (4) failed to maintain records or failed to provide information to the Bureau in connection with a Bureau examination in a manner that violates Section 1036(a)(2) of the CFPA.”
    • Prior to the issuance of the CIDs, a Bureau enforcement attorney sent direct messages to Fastbucks’s owner via social media that primarily concerned a state enforcement action against Fastbucks that the enforcement attorney worked on prior to his Bureau employment, when he was employed by the state’s Attorney General’s office. Even though the attorney did not work on the Bureau’s investigation of Fastbucks, the company argued that the messages, which it characterized as harassing and taunting, showed that the CIDs were issued for an improper purpose.  Director Kraninger rejected this argument, stating that the CIDs “have been subject to multiple levels of review within the Bureau…that have ensured they were issued for a proper purpose and in accordance with all applicable regulations.”
    • Even though Fastbucks had not challenged the sufficiency of the CID’s notification of purpose, Director Kraninger modified the notification as set forth above.
  • In re Kern-Fuller and Sutter
    • The CID’s original notification of purpose stated that the CID had been issued “to determine whether persons that purport to acquire the rights to veterans’ military pensions or other benefits in exchange for lump-sums are offering to extend credit or extending credit. The purpose of this investigation is also to determine whether, in connection with the offering or collecting on these products, such persons have engaged in unfair, deceptive, or abusive acts or practices in violation of [sections 1031 and 1036 of the CFPA].”
    • The modified notification states that the purpose of the investigation “is to determine whether persons that purport to acquire the rights to veterans’ military pensions or other benefits in exchange for lump-sums are offering to extend credit or extending credit. The purpose of this investigation is also to determine whether such persons, in connection with the offering or collecting on these products, have made false or misleading representations to consumers or have failed to disclose to consumers the applicable interest rate on the credit offer, in a manner that is unfair, deceptive, or abusive in violations of Sections 1031 and 1036 of the [CFPA].”
    • Director Kraninger rejected the petitioners’ argument that the CIDs should be set aside because the CFPB is unconstitutional, stating that the “Bureau has consistently maintained that its statutory structure is constitutional under controlling Supreme Court precedents.”   She also rejected their argument that because they are attorneys, the CIDs should be modified to protect attorney-client privileged information and attorney work product.  She concluded that modification of the CIDs was unnecessary because “the CFPA and the Bureau’s rules already provide an orderly procedure for asserting privilege during the giving of oral testimony in response to a CID.” Director Kraninger stated that while the petitioners “are entitled to raise appropriate privilege objections while testifying, in conformance with the procedures provided by the CFPA and the Bureau’s rules, their premature assertion of privilege provides no grounds for setting aside the CID itself.”
  • In re Amy Plummer
    • Ms. Plummer, who worked in an administrative support position for petitioners Kern-Fuller and Sutter, received a CID with the same original notification of purpose as the CIDs received by those petitioners.  Even though Ms. Plummer had not challenged the sufficiency of the notification of purpose, the decision and order denying her petition modified the notification in the same manner as the notification in the Kern-Fuller/Sutter CIDs.
    • Director Kraninger rejected Ms. Plummer’s argument that the petition should be set aside because it exceeded the Bureau’s authority over the practice of law and because it improperly sought attorney-client privileged information and attorney work product.  She found that Ms. Plummer’s first argument ignored language in the CFPA that a person whose activities are otherwise excluded from the CFPB’s supervisory and enforcement authority can still be subject to requests to CIDs issued by the Bureau “in the course of carrying out its responsibilities to enforce the federal consumer financial laws.” Ms. Plummer’s second argument was rejected on the same grounds as the similar argument made by petitioners Kern-Fuller and Sutter.
  • In re Fair Collections and Outsourcing, Inc.
    • The CID’s original notification of purpose stated that the CID had been issued “to determine whether debt collectors or other unnamed persons have engaged in, or are engaging in, unlawful acts or practices in connection with the collection and reporting of consumer debts in violation of the [FDCPA], the [FCRA], [the regulations concerning the Duties of Furnishers of Information to Consumer Reporting Agencies], or any other federal consumer financial law.”
    • The modified notification states that the purpose of the investigation “is to determine whether debt collectors or associated persons, in connection with the collection and reporting of consumer debts, have: (1) made false or misleading representations in a manner that violates the [FDCPA], principally section 1692e; (2) failed to perform the duties of a furnisher of information to consumer reporting agencies, including by failing to establish reasonable policies and procedures concerning the accuracy and integrity of furnished information or to conduct appropriate investigations of disputes, in a manner that violates the [FCRA], principally section 1681s-2, or [Reg. V], principally Subpart E; or (3) thereby also violated Section 1036(a)(2) of the [CFPA].”
    • Director Kraninger rejected the petitioner’s  argument that the petition should be set aside for the same reason as set forth in her decision and order regarding petitioners Kern-Fuller and Sutter.  She also rejected the petitioner’s argument that the Bureau’s overall investigation had been fundamentally unfair because it did not have enough time to comply with past CIDs, the Bureau’s document submission standards were overly demanding, and the CIDs were issued after Enforcement had indicated that the petitioner could be the subject of a public enforcement action and after discussing the possibility of settlement.  With regard to the last argument, Director Kraninger stated that the petitioner had not shown that the CID was issued for an improper purpose or in bad faith because it had failed to provide “any statutory or other restriction on the Bureau’s ability to issue a CID after an enforcement action is authorized but not filed” or to “explain why it would be improper for the Bureau to issue a CID to obtain additional evidence before authorizing an enforcement action.”
  • In re Jawat Nesheiwat
    • The CID’s original notification of purpose stated that the CID had been issued “to determine whether student loan debt-relief providers, mortgage lenders, or other persons, in connection with obtaining, using, or disclosing consumer information or with marketing or selling products and services relating to student loan consolidations, repayment plans, and forgiveness plans, have engaged in unfair, deceptive, or abusive acts or practices in violation of sections 1031 and 1036 of the [CFPA]; or have violated the [FCRA] or the Telemarketing Sales Rule.”
    • The modified notification states that the purpose of the investigation “is to determine whether student loan debt-relief providers, mortgage originators, or associated persons, in connection with obtaining, using, or disclosing consumer information or with marketing or selling products and services relating to student loan consolidations, repayment plans, and forgiveness plans, have: made false or misleading representations to consumers in a manner that is unfair, deceptive, or abusive  in violation of sections 1031 and 1036 of the [CFPA]; or have obtained or used consumer reports without a permissible purpose in a manner that violates the [FCRA]; or have made false or misleading representations to consumers or requested or received prohibited payments from consumers in a manner that violates the Telemarketing Sales Rule.”
    • Director Kraninger denied Mr. Nesheiwat’s request for the redaction of his name from all public materials concerning his petition because he had failed to “articulate any argument why his name would be protected from disclosure under FOIA,” and had not “clearly identif[ied] any harm he would suffer from disclosure.”

 

In a letter sent to Senator Elizabeth Warren regarding the CFPB’s supervision of student loan servicers, CFPB Director Kathy Kraninger discussed the Bureau’s relationship with the Department of Education.

In the letter, Director Kraninger responded to a question from Senator Warren regarding the guidance issued by the ED in December 2017 to student loan servicers about the application of the Privacy Act of 1974 to certain student loan records.  Director Kraninger stated that since December 2017, based on such guidance, student loan servicers have declined to produce information requested by the Bureau’s examiners in connection with exams related to Direct Loans and Federal Family Loan Program loans held by the ED.  (Under the ED’s guidance, servicers would have been required to obtain the ED’s permission to produce the information requested by the Bureau’s examiners.)

Director Kraninger also noted that the ED terminated a Memorandum of Understanding with the Bureau effective October 1, 2017.  She commented that because the Bureau is statutorily mandated to have an MOU with the ED, “it is a priority for us at the Bureau to make progress on a new MOU.”  Director Kraninger also indicated that she wants to have a Private Education Loan Ombudsman in place to work on a new MOU “and facilitate a productive relationship going forward with the Department so that we can carry out our responsibilities.”  (Seth Frotman, the former Ombudsman and now a vocal critic of the Bureau, resigned in August 2018.)

Director Kraninger noted that since the MOU was terminated, the ED has provided the Bureau “with the confidentiality assurances necessary for the Bureau to share confidential supervisory information with it.”

 

 

In remarks today at the Bipartisan Policy Center (BPC), CFPB Director Kathy Kraninger outlined how she plans to use the various “tools” available to the CFPB.  While consistent with her recent testimony to House and Senate committees, her BPC remarks provide a more detailed view of the approach she plans to take in wielding the CFPB’s authority.

Director Kraninger began her remarks by indicating once again that the CFPB’s focus under her leadership will be on the prevention of harm to consumers. She then provided the following outline of how the CFPB would use its four “tools” (education, rulemaking, supervision and enforcement) to prevent consumer harm:

  • Education.  The CFPB will pursue education initiatives intended to empower consumers to make financial decisions that best suit their individual needs.  She noted as an example the CFPB’s savings initiative that is intended to help consumers increase their savings, particularly savings for emergency needs.
  • Rulemaking. The CFPB will no longer engage in rulemaking through enforcement and will pursue rulemaking “deliberately and transparently” using the APA rulemaking process.  She indicated that rulemaking would be used to provide “clear rules of the road” to regulated entities and that the Bureau “must acknowledge” that compliance costs impact consumer access to and the availability of credit.
  • Supervision.  CFPB examiners will look for a “culture of compliance” at supervised entities and seek to use examinations to “head off trouble.”  Director Kraninger suggested that the CFPB would take a favorable view of companies that self-report and take corrective action to remedy consumer harm.  She indicated that in her role as FFIEC Chairman, she would seek to strengthen coordination between federal and state regulators.
  • Enforcement.  The CFPB will engage in “careful and purposeful enforcement” where “bad actors” have violated clear rules or where the CFPB believes a public enforcement action is needed “to send a clear message” to deter wrongful behavior.  Director Kraninger indicated that the CFPB will move expeditiously in deciding whether or not to pursue an enforcement action.

With regard to the CFPB’s highly anticipated debt collection proposed rule, Director Kraninger indicated that the proposal will be issued “in the coming weeks” and include limits on the number of calls collectors can make on a weekly basis, address communications by email and text, and require new disclosures at the beginning of the collection process.

She also announced that the CFPB will be launching a series of symposiums on topics related to the CFPB’s mission, with the first symposium to look at clarifying the meaning of “abusive acts or practices” in the Dodd-Frank Act.  In its Fall 2018 rulemaking agenda, the CFPB announced that it was considering whether it should engage in rulemaking to clarify the meaning of “abusive.”  Director Kraninger indicated that the symposium, which would include experts and stakeholders, would help to inform the CFPB’s decision on such rulemaking.

In response to questions from audience members, Director Kraninger indicated that:

  • She agreed with former Acting Director Mulvaney’s philosophy that the CFPB should go no further than what its statutory authority expressly provides.
  • While “there’s a place” for CFPB guidance, she would need to look carefully at what the Bureau could address through guidance and that rulemaking, rather than guidance, would be appropriate for something that the CFPB wanted “to hold institutions to.”
  • She is looking at staffing levels but has no goal of increasing or decreasing the number of CFPB staff members.

CFPB Director Kraninger is scheduled to give public remarks at a Bipartisan Policy Center program scheduled for April 17, 2019 at 10 a.m. in Washington, D.C.

According to BCP’s website, the remarks will be Director Kraninger’s “first public remarks laying out her vision for the Bureau” and “will cover topics including protecting consumers from bad actors, providing clear rules of the road to financial institutions and non-bank lenders, and empowering consumers to make sound financial choices.”  A panel discussion will follow her remarks.

 

The Federal Financial Institutions Examination Council (FFIEC) announced that CFPB Director Kathy Kraninger became the Chairman of the FFIEC on April 1, 2019.  Ms. Kraninger is the first CFPB Director to serve as FFIEC Chairman.  Her two-year term runs until March 31, 2021.

The FFIEC chairmanship rotates among the FFIEC’s federal members for two-year terms in the following order: OCC, Federal Reserve, FDIC, CFPB, and NCUA.  As Chairman, Ms. Kraninger succeeds FDIC Director Jelena McWilliams.

The FFIEC is empowered to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions by its constituent agencies and to make recommendations to promote uniformity in the supervision of financial institutions.  The FFIEC is responsible for developing uniform reporting systems for federally supervised financial institutions, their holding companies, and the nonbank subsidiaries of such institutions and their holding companies.

 

 

Director Kraninger was sharply criticized by Democrats at today’s hearing on the Bureau’s semi-annual report held by the Senate Banking Committee.

Ms. Kraninger’s opening remarks and written testimony repeated nearly verbatim her opening remarks and written testimony to the House Financial Services Committee last week.  She indicated once again that the Bureau’s primary goal would be prevention of harm, that the Bureau would focus its enforcement activities on “bad actors, and that she would emphasize stability, transparency, and consistency. 

Like their Democratic counterparts on the House committee, Democratic members were highly critical of the Bureau’s proposal to eliminate the ability to repay (ATR) requirement in its payday loan rule, its decision to discontinue MLA compliance examinations, and the decline in CFPB enforcement activity with regard to fair lending and student loan servicing.  Several Democratic members also criticized the Bureau’s continued employment of Eric Blankenstein as Policy Associate Director of the Bureau’s Office of Supervision, Enforcement, and Fair Lending.  Mr. Blankenstein is alleged to have made racially offensive comments in 2016.

As she did during her House appearance, Ms. Kraninger held steadfast to her view that the CFPB lacks clear authority to examine financial institutions for MLA compliance and referred lawmakers to the proposed legislation submitted by the CFPB that would amend the Dodd-Frank Act to expressly provide such authority.

With regard to the Bureau’s proposal to eliminate the payday loan rule’s ATR requirement, Democratic members called into question the sufficiency of the CFPB’s basis for its proposal and highlighted the more than $7 billion in additional revenue that the CFPB has estimated lenders would receive as a result of eliminating the ATR requirement.  Despite Ms. Kraninger’s statement that she would approach the rulemaking with an “open mind,” Democratic members expressed skepticism as to whether the Bureau would objectively consider the evidentiary record.  

In response to a question from Senator Doug Jones regarding the Bureau’s use of the disparate impact theory in future fair lending cases, Ms. Kraninger referenced the CFPB’s Fall 2018 rulemaking agenda which indicated in its preamble that the future rulemaking under consideration included the requirements of the Equal Credit Opportunity Act regarding the disparate impact doctrine.  Ms. Kraninger declined to express her personal views on the doctrine but indicated that she was involved in internal discussions regarding potential pre-rulemaking activities.   

As might be expected, Senator Elizabeth Warren was perhaps Director Kraninger’s harshest critic, highlighting the lack of new Bureau fair lending and student lending enforcement actions filed since Director Cordray’s departure.  Senator Elizabeth Warren concluded her questioning with the comment that if Ms. Kraninger had “any decency,” she “would do [her] job or resign.”

In addition to the questions asked by Democratic members about topics also covered at the House hearing, Senator Mark Warner asked Ms. Kraninger about the CFPB’s “GSE patch” for qualified mortgages.  The “patch” is an exemption created by the CFPB’s QM rule from its 43 percent debt to income ratio cap for mortgages eligible for purchase by Fannie Mae or Freddie Mac.  It is a temporary measure that is set to expire in January 2021 or on the day the GSEs exit conservatorship, whichever occurs first.  Senator Warner stressed the need for the CFPB to take steps to address the patch to avoid potential adverse consequences to the mortgage market should the patch expire.

Like their Republican counterparts on the House committee, Republican members renewed their criticism of Director Cordray’s “regulation by enforcement” approach.  They also expressed continuing concern over the Bureau’s data collection practices, praised former Acting Director Mulvaney’s creation of an Office of Cost Benefit Analysis, and voiced support for the Bureau’s use of such an analysis in carrying out its authorities.

 

 

The House Financial Services Committee has updated its website to confirm that CFPB Director Kraninger is scheduled to appear at the Committee’s hearing tomorrow entitled “Putting Consumers First? A Semi-Annual Review of the Consumer Financial Protection Bureau.”

The update also indicates that Director Kraninger’s appearance will be followed by a panel consisting of the following individuals:

  • Hilary Shelton, Director & Senior Vice President for Advocacy and Policy, National Association for the Advancement of Colored People
  • Linda Jun, Senior Policy Counsel, Americans for Financial Reform
  • Jennifer Davis, Government Relations Deputy Director, National Military Family Association
  • Seth Frotman, Executive Director, Student Borrower Protection Center
  • Scott Weltman, Managing Shareholder, Weltman, Weinberg & Reis Co., L.P.A.

In addition, the Committee’s majority staff issued a memorandum to Committee members about the hearing that indicates former Acting Director Mulvaney was invited to appear but failed to respond to the Committee’s requests.  The memorandum includes a summary of the Bureau’s Spring 2018 and Fall 2018 Semi-Annual Reports that notes the “significant drop in enforcement actions” and that the Spring 2018 report “included only one instance of public enforcement action regarding fair lending” while the Fall 2018 report “reported no public fair lending enforcement actions during the covered April-September 2018 period, despite issuing a higher number of supervisory actions against institutions.”  It also notes the Bureau’s reduced spending in 2018 as well as the reduction in its workforce.

 

The Senate Banking Committee has announced that it will hold a hearing on March 12, 2019 entitled “The Consumer Financial Protection Bureau’s Semi-Annual Report to Congress” at which CFPB Director Kraninger is scheduled to appear.

Director Kraninger is also expected to appear at the hearing of the House Financial Services Committee scheduled for March 7, 2019 entitled “Putting Consumers First? A Semi-Annual Review of the Consumer Financial Protection Bureau.”  However, the Committee’s website does not yet indicate that she is scheduled to appear.

 

 

The pendency of three cases in circuit courts challenging the CFPB’s constitutionality has given rise to speculation as to whether the CFPB will continue to defend its constitutionality under Director Kraninger’s leadership.  The CFPB continued to defend its constitutionality in these cases while under former Acting Director Mulvaney’s leadership.  It did so, however, as a fallback to its primary argument that because Mr. Mulvaney was removable at will by the President and had ratified the CFPB’s decision to bring the lawsuit in question, any constitutional defect that may have existed with the CFPB’s initiation of the lawsuit was cured.

On January 9, a Ninth Circuit panel heard oral argument in CFPB v. Seila Law LLC, one of the three pending circuit court cases.  The appellant in Seila Law is asking the Ninth Circuit to overturn the district court’s refusal to set aside a Bureau civil investigative demand, arguing that the CID is invalid because the CFPB’s structure is unconstitutional.  In its answering brief filed with the Ninth Circuit, the CFPB relied on the ratification argument and its fallback constitutionality argument.  (Mr. Mulvaney was Acting Director at the time of briefing.)

At the oral argument, the CFPB maintained the positions taken in its brief, namely that Mr. Mulvaney’s ratification cured any constitutional defect and, in any event, the Bureau’s structure is constitutional under U.S. Supreme Court precedent and the D.C. Circuit’s en banc PHH decision.  This would suggest that Director Kraninger, like former Acting Director Mulvaney, will continue to defend the CFPB’s constitutionality in the other pending cases.

Should she do so, however, Ms. Kraninger will be at odds with the position of the Department of Justice.  In opposing the petition for certiorari filed by State National Bank of Big Spring (which the Supreme Court denied this week), DOJ argued that while it agreed with the bank that the CFPB’s structure is unconstitutional and the proper remedy would be to sever the Dodd-Frank Act’s for-cause removal provision, the case was a poor vehicle for deciding the constitutionality issue.  It also noted that its position “is that of the United States, not the position of the Bureau to date.”  The DOJ had asked the Supreme Court to allow the CFPB to weigh in should it grant the petition for certiorari.  (The DOJ’s position could have added significance because of the Dodd-Frank provision that requires the Bureau to seek the Attorney General’s consent before it can represent itself in the Supreme Court.)

If Director Kraninger does have a change of heart, she will be following in the shoes of Joseph Otting, who was appointed Acting FHFA Director by President Trump (and also serves as Comptroller of the Currency).  Next week, the Fifth Circuit is scheduled to hold oral argument in the en banc rehearing of Collins v. Mnuchin, in which a Fifth Circuit panel found that the FHFA is unconstitutionally structured because it is excessively insulated from Executive Branch oversight.  The plaintiffs, shareholders of two of the housing government services enterprises (GSEs), are seeking to invalidate an amendment to a preferred stock agreement between the Treasury Department and the FHFA as conservator for the GSEs.

The Fifth Circuit panel had determined that the appropriate remedy for the constitutional violation was to sever the provision of the Housing and Economic Recovery Act of 2008 (HERA) that only allows the President to remove the FHFA Director “for cause” while “leav[ing] intact the remainder of HERA and the FHFA’s past actions.”  The plaintiffs sought a rehearing en banc to overturn the panel’s rulings that the FHFA acted within its statutory authority in entering into the agreement and that the FHFA’s unconstitutional structure did not impact the agreement’s validity.  The FHFA also sought a rehearing en banc but with the goal of overturning the panel’s determination that the plaintiffs had Article III standing to bring a constitutional challenge.

Despite having argued in its petition for rehearing that the panel’s constitutionality ruling was incorrect, the FHFA has now announced that it will not defend the FHFA’s constitutionality to the en banc court.  In the En Banc Supplemental Brief of the FHFA and Mr. Otting, the FHFA states that Mr. Otting “has reconsidered the issues presented in this case.”  It further states that while it remains the FHFA’s position that the plaintiffs’ lack of standing makes it unnecessary for the en banc court to reach the constitutionality issue, to the extent the court concludes it is necessary to do so “FHFA will not defend the constitutionality of HERA’s for cause removal provision and agrees with the analysis in Section II.A of the Treasury’s Supplemental Brief that the provision infringes on the President’s control of executive authority.”

The two other pending circuit court cases challenging the CFPB’s constitutionality are the All American Check Cashing case pending in the Fifth Circuit and the RD Legal Funding case pending in the Second Circuit.  Oral argument is tentatively calendared for the week of March 11, 2019 in the All American Check Cashing case and briefing is scheduled to begin next month in the RD Legal Funding case.