PHH - Consumer Financial Services Alert 22 June 2015 FINAL

CFPB Issues Final Decision in In Re: PHH Corp.:
First Agency Decision in Contested Administrative
Proceeding
Consumer Financial Services Alert
By Ori Lev
Earlier this month, the Consumer Financial Protection Bureau (CFPB) issued the Director’s
final decision in the CFPB’s enforcement action against PHH Corp. (PPH). The decision is
the agency’s first ruling in a contested administrative proceeding and sheds light on how the
agency—at least under the leadership of Director Richard Cordray—will approach these
matters. Most strikingly, Director Cordray overturned several key rulings by the
Administrative Law Judge (ALJ), resulting in a decision requiring PHH to pay over $109
million in disgorgement, nearly 17 times as much as the $6.4 million recommended by the
ALJ.
Director Cordray’s decision sets forth the agency’s view on numerous Real Estate
Settlement Procedures Act (RESPA) interpretation issues: the statute of limitations
applicable to administrative enforcement actions; when a RESPA claim accrues; whether the
continuing violation doctrine applies; what constitutes a referral; and, most importantly, what
conduct Section 8(c)(2) of RESPA protects. The decision also establishes precedent for how
the CFPB might handle future administrative proceedings, including what standard of review
applies, how to calculate disgorgement, and the propriety of civil money penalties. Below, we
set forth the background of the case, explain the CFPB’s administrative process, and discuss
the more important substantive and procedural aspects of the decision.
Background
The CFPB brought an enforcement action against PHH under RESPA, which prohibits the
payment of kickbacks in exchange for referrals in the real estate market. 12 U.S.C. §
2607(a), (b). The CFPB alleged that PHH—a mortgage lender—received kickbacks from
mortgage insurers to whom PHH referred business. The CFPB alleged that those kickbacks
took the form of reinsurance premiums that the mortgage insurers paid to PHH’s re-
insurance subsidiary, Atrium, for mortgage re-insurance. The CFPB’s case rested on
evidence that showed that PHH referred substantially more business to mortgage insurers
who purchased reinsurance from Atrium than those who did not, and evidence that the
reinsurance did not actually transfer substantial risk to Atrium commensurate with the
premiums it was paid.
Rather than file suit in federal district court, as it has in almost all of its other contested
enforcement actions, the CFPB instead chose to file an administrative claim before an ALJ.
Following trial, the ALJ ruled in favor of the CFPB, finding that many of the mortgage
reinsurance premiums received by PHH were prohibited kickbacks that were paid in
exchange for PHH’s referral of mortgage insurance business. Based on rulings that the
June 22, 2015
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First Agency Decision in Contested Administrative Proceeding
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RESPA violations at issue occurred when the underlying loans closed, as opposed to when
the reinsurance premiums were paid to Atrium, and that disgorgement was appropriately
based on the net premiums received by PHH (after deducting the claims it paid out on the
reinsurance), the ALJ recommended that PHH be ordered to disgorge more than $6.4
million. Both parties appealed different aspects of the ALJ’s decision to the Director, who
issued last week’s decision.
Substantive RESPA Issues
The PHH decision is notable for the number of statutory interpretation issues it addresses.
Depending on whether or not the Court of Appeals affords the agency’s interpretations
deference (an issue discussed below), these interpretations may have wide-ranging impact
on the real estate industry and future CFPB enforcement actions.
No Statute of Limitations Applies to RESPA Administrative Actions
Director Cordray agreed with the ALJ that although RESPA provides a three-year limitations
period for enforcement actions brought in federal court, no statute of limitations applies to
administrative enforcement actions brought by the CFPB. PHH at 10-12. Like the ALJ,
Director Cordray relied on the Supreme Court’s decision in BP America Production Co. v.
Burton, 549 U.S. 84 (2006), in reaching this decision. In BP, the Supreme Court held that the
term “action” as used in a statute of limitations provision applies to “judicial, not
administrative proceedings.” Id. at 91. Applying the same reasoning to RESPA’s statute of
limitations provision, Director Cordray reasoned that it too only applies to actions brought in
federal court. Recognizing that the Department of Housing and Urban Development (HUD),
which enforced RESPA prior to the CFPB’s creation, did not have administrative
enforcement authority and that the three-year limitations provision therefore applied to HUD’s
enforcement powers until the creation of the CFPB, Director Cordray held that the CFPB
cannot pursue claims that arose more than three years before the CFPB assumed
enforcement authority on July 21, 2011 (because such claims would have been barred as of
that date and could not be revived).
On its face, the Director’s determination with respect to the inapplicability of the statute of
limitations appears to comport to Supreme Court precedent. The result, however, is rather
extraordinary in light of the fact that CFPB has prosecutorial discretion to elect its forum and
can obtain the very same remedies—including civil money penalties—in either federal district
court or administratively. If the Court of Appeals upholds this aspect of the decision, the
CFPB could be free to pursue any RESPA claims that have accrued since July 21, 2008, and
seek substantial penalties for any such violations that occurred after July 21, 2011, when the
Dodd-Frank Act’s civil penalty provisions became effective, without regard to any statute of
limitations.
RESPA Claims Accrue Upon Payment or Receipt of the Kickback
The critical aspect of Director Cordray’s decision that resulted in the substantial increase in
the dollar value of the disgorgement that PHH was ordered to pay was his determination that
the RESPA violations at issue accrued when the mortgage insurers paid PHH for the
reinsurance, and not at the time the underlying mortgage loans closed. To date, the leading
authority on this question was the Fifth Circuit’s decision in Snow v. First American Title, 332
F.3d 356 (5th Cir. 2003). Snow held that the RESPA violation in that case occurred at the

3
time of loan closing. Id. at 358-59. The Director distinguished Snow on the grounds that the
payments there at issue—for title insurance—were all made at the time of closing, noting that
Snow itself recognized that where “purchasers pay for a settlement service … at a time other
than the closing, … ‘the date of the occurrence of the violation’ presumably would be the
date of payment, not the unrelated closing.” PHH at 23 (quoting Snow, 332 F.3d at 359 n.3).
In PHH, the borrowers paid the underlying mortgage insurance premium—which in turn led
to the reinsurance premium/kickback payment to Atrium—each month with their mortgage
payment. “Because of this crucial factual distinction,” PHH concluded, “Snow’s reasoning
does not apply here.” PHH at 23.
Relying on the statutory language rendering it a violation to give or accept a thing of value for
the referral of settlement services, Director Cordray focused on the payment of reinsurance
premiums to Atrium as the violative conduct, as opposed to the consumers’ payments of the
underlying mortgage insurance premium. In this way, too, Director Cordray differed from
Snow, which held that it was the consumer’s payment for title insurance—and not the
subsequent payment of the title insurance company’s commission to its agent—that
constituted the violation because the title agent earned the commission at the time of the
consumer’s payment. Snow, 332 F.3d at 359 (relying on the definition of “thing of value” as
including “credits representing monies that may be paid at a future date”). After discussing
the fact that the consumers in PHH paid for their mortgage insurance in installments over
time, Director Cordray then concluded that each time the mortgage insurers made a payment
to PHH they violated the statute, without ever acknowledging this difference with Snow. PHH
at 23.
It is this holding that resulted in most of the substantial increase in the disgorgement amount
ordered by the Director. The ALJ had held that the RESPA violations occurred at the time of
the closing of the underlying loans, and thus limited disgorgement to those loans that had
closed after July 21, 2008 (three years prior to the CFPB’s gaining its authority to bring
administrative enforcement actions). Director Cordray instead included all payments made
by the mortgage insurers to Atrium after July 21, 2008, regardless of when the underlying
loans closed. This substantially expanded the number of payments subject to disgorgement.
The Continuing Violation Doctrine Does Not Apply to RESPA
Director Cordray did reject one key argument advanced by Enforcement Counsel—that the
continuing violation doctrine applied and allowed for disgorgement for the entire 18-year
course of PHH’s conduct, going all the way back to 1995. Recognizing that the continuing
violation doctrine typically applies “‘in cases involving a pattern or policy of employment
discrimination in which there has been no single act of discrimination sufficient to trigger the
running of the limitations period,’” PHH at 26 (quoting Velazquez v. Chardon, 736 F.2d 831,
833 (1st Cir. 1984)), the Director held that because “violations of section 8 of RESPA are
individually actionable acts,” the continuing violation doctrine does not apply. Id. at 26-27. A
contrary ruling could have exposed PHH to even greater liability.1
1
Notably, the CFPB has argued that the continuing violation doctrine applies in other RESPA cases. See CFPB’s
Opposition to Defendants’ Motion for Judgment on the Pleadings, at 18-19, in CFPB v. Borders & Borders, No. 3:13-cv-
01047-CRS-DW (W.D. Ky.), Dkt 42. Presumably, the Director’s determination that the doctrine does not apply to cases
involving Section 8 of RESPA will be binding on the CFPB in the Borders litigation as well.

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Indirect Referrals are Actionable Under RESPA
PHH argued that providing incentives to its correspondent lenders to select mortgage
insurers that had entered into captive reinsurance agreements with Atrium did not constitute
“referrals” under RESPA because that conduct influenced correspondent lenders as opposed
to borrowers. Director Cordray summarily rejected this argument, finding that “[a] referral is
an action directed to a person that affects the selection of a mortgage service paid for by any
person.” PHH at 14 (citing 12 C.F.R. § 1024.14(f)). The Director’s citation to the regulatory
provision defining referral, however, is not accurate. The regulation does not state that a
referral is an action that affects the selection of a settlement service paid for by any person.
Rather, the regulation provides that a referral is an action that affects any person’s selection
of a settlement service provider where “such person” will pay for the settlement service. 12
C.F.R. § 1024.14(f). That is, the plain language of the regulation requires that the “any
person” being influenced be the same person who will pay for the settlement service for the
influence to constitute a referral. Without acknowledging this point, the Director does note
that PHH’s conduct “indirect[ly] influence[d]” borrowers (who paid for the mortgage
insurance) and thus constituted a referral.
RESPA Section 8(c)(2) Does Not Shield Market-Value Payments
Perhaps the most far-reaching holding of PHH is Director Cordray’s interpretation of Section
8(c)(2) of RESPA. That section provides that “[n]othing in [section 8] shall be construed as
prohibiting … the payment to any person of a bona fide salary or compensation or other
payment for goods or facilities actually furnished or services actually performed.” 12 U.S.C. §
2607(c)(2).
The ALJ, relying on a 1997 HUD interpretive letter, concluded that section 8(c)(2) provides
an affirmative defense to section 8(a) claims: that is, if the reinsurance was actually provided
and the payments for that reinsurance did not exceed its value, then there would be no
violation, even if the arrangement would otherwise violate Section 8(a). PHH at 14-15
(describing ALJ’s ruling). The 1997 HUD letter relied upon by the ALJ addressed captive
reinsurance arrangements such as Atrium. The letter provided that “so long as payments for
reinsurance under captive reinsurance arrangements are solely ‘payments for goods or
facilities actually furnished or for services actually performed,’ these arrangements are
permissible under RESPA.” PHH at 18 (quoting HUD Letter at 1). The letter went on to note
that:
If the lender or its reinsurance affiliate is merely given a thing of value by the primary insurer in
return for this referral, in monies or in the opportunity to participate in a money-making program,
then section 8 would be violated. If, however, the lender’s reinsurance affiliate actually performs
reinsurance services and compensation from the primary insurer is bona fide and does not
exceed the value of the reinsurance, then such payments would be permissible under subsection
8(c).
PHH at 18 (quoting HUD Letter at 3) (emphasis added). Relying on the letter, the ALJ
focused his analysis on whether the reinsurance resulted in a real transfer of risk and
whether the price of the reinsurance was commensurate with the risk transferred. PHH at 15.
Director Cordray rejected this approach. Instead, he held that Section 8(c)(2) requires not
only that any payments constitute reasonable compensation for “services actually
performed,” but also that the payments be “bona fide,” which he interpreted to mean that
they not be “tied in any way to a referral of business.” PHH at 17. Thus, payments made at

5
market value for services rendered are not insulated from Section 8(a) liability if those
services and the resulting payments are the result of the referral of settlement service
business. Relying in part on the regulatory definition of “thing of value”—which includes “the
opportunity to participate in a money-making program,” 12 C.F.R. § 1024.14(d); see also
PHH at 18 (quoting HUD Letter at 3)—the Director held that providing someone with
business in exchange for referrals, even if the business is paid for at market rates, violates
Section 8(a) and is not exempted by Section 8(c)(2).
This holding is consistent with the position the CFPB took in the Consent Order it issued
against Lighthouse Title. There, the CFPB stated that “[e]ntering a contract is a ‘thing of
value’ within the meaning of Section 8, even if the fees paid under that contract are fair
market value for the goods or services provided. Entering a contract with the agreement or
understanding that in exchange the counterparty will refer settlement services related to
federally related mortgage loans violates Section 8(a).” Lighthouse Consent Order, ¶¶ 20-21
(emphasis added). In Lighthouse, the respondent had entered marketing services
agreements with various counterparties. The CFPB found that the respondent had entered
into those agreements with the understanding that in return the counterparties would refer
closings and title insurance business to it. Id. ¶ 12. While the CFPB also found that the
payments under the marketing services agreements were not based on fair market value, it
went further and noted that merely entering into the contracts, with the understanding that
referrals would follow, violated the law.
The message from the CFPB is now clear: no matter what the amount of payments made for
services rendered, any quid pro quo agreement in which one party receives business as a
result of referring settlement service business to another party is, in the CFPB’s view, a
violation of Section 8(a). Unless the PHH decision is reversed on appeal, this holding could
have far-reaching consequences in the real estate industry, where the common
understanding has been that Section 8(c)(2) provides substantially broader safe harbor from
RESPA claims so long as any payments made constitute reasonable compensation for
services provided. This may be the aspect of the Director’s decision most vulnerable on
appeal, particularly if the Court of Appeals determines, as discussed further below, that the
rule of lenity applies, and that the CFPB is therefore not entitled to deference in its
interpretation of the statute.
The CFPB Administrative Process
The Administrative Process Provides for an Expedited Decision
The PHH matter was the CFPB’s first contested administrative proceeding. As such, it
presents the first opportunity to see how the CFPB intends to apply its administrative rules.
Under the Dodd-Frank Act, the CFPB has a rather unique ability to choose whether to bring
claims in federal district court or before an ALJ, and can get the very same remedies
regardless of which forum it chooses. In light of this, the CFPB’s Rules of Practice for
Adjudication Proceedings, which govern matters brought administratively, were consciously
crafted to create a litigation path that is different from that otherwise available to the CFPB in
federal court. Most markedly, the CFPB’s Rules limit discovery and impose strict time
limitations on cases filed before an ALJ, requiring a recommended decision no later than 300
days after Enforcement Counsel first files its Notice of Charges. 12 C.F.R. §§ 1081.206-10;
1081.400. In the PHH case, the CFPB filed its Notice of Charges on January 29, 2014.

6
Exactly 300 days later, on November 25, 2014, the ALJ issued his recommended decision in
the matter. If the case had been brought in federal district court, it is almost certain that no
decision would have been issued by that date—in all likelihood, the parties would still have
been engaged in discovery at that time.
The CFPB Missed a Key Deadline
Interestingly, the Director seems not to have complied with another related deadline in the
CFPB’s rules. Following the ALJ’s recommended decision, the Rules provide that the CFPB
is to notify the parties that the case has been submitted for final decision “at the expiration of
the time permitted for filing of reply briefs.” 12 C.F.R. § 1081.405(d). The Director must then
issue a final decision within 90 days of the notice. Id. This 90-day provision is, in fact,
required by the Dodd-Frank Act itself. 12 U.S.C. § 5563(b)(3). In PHH, although the parties’
reply briefs were filed on February 20, 2015, as required by the Director’s scheduling order,
the Director’s decision was not issued for 104 days after that date. The docket does not
indicate whether or when the CFPB issued the required notice to the parties that the case
had been submitted for decision. Clearly, however, either that notice was delayed or the
Director’s decision fell outside the 90-day window. The two-week delay displays a surprising
willingness to depart from the strict timelines set forth in the statute and the Rules. If nothing
else, it sets a disappointing precedent for future ALJs’ compliance with the 300-day rule cited
above—for if the Director is free to disregard the deadlines that are found in the Act itself,
what is to stop ALJs from disregarding the Rules-based 300-day limit?
The Director Applied De Novo Review and a Preponderance of the Evidence
Standard
Director Cordray’s decision contains some important, if unsurprising, procedural rulings that
establish precedent that presumably will be applied in future administrative actions. First, he
determined that his review as to both facts and law was de novo, such that no deference was
owed to the ALJ’s findings of fact or conclusions of law. PHH at 9. Director Cordray based
this determination on the provision in the CFPB’s Rules that provides that the Director shall
“exercise all powers which he or she could have exercised if he or she had made the
recommended decision.” 12 C.F.R. § 1081.405(a). While not surprising given the language
of the rule, what is surprising is the degree to which the Director felt free to depart from the
ALJ’s rulings, not just in legal interpretation but in the remedy ordered. The clear message is
that Director Corday really will exercise de novo review in such cases, and will not hesitate to
disagree with legal or factual findings made by the ALJ. The Director also made clear that
the proceeding was governed by a “preponderance of the evidence standard.” PHH at 9,
citing SEC v. Steadman, 450 U.S. 91, 95-102 (1981).
Both Parties Appealed, But the Director Always Has the Final Say
In this case, both the CFPB’s Enforcement Counsel and PHH appealed aspects of the ALJ’s
ruling. Even absent such appeals, however, the final decision in contested administrative
proceedings belongs to the Director. In cases where no appeal is filed, the Director may
either affirm the ALJ’s ruling within 40 days or else must ask for additional briefing. 12 C.F.R.
§ 1081.402. If a party intends to seek judicial review of the ALJ’s decision, it must first file a
timely appeal to the Director. The failure to file such an appeal waives the right to further
judicial review. 12 C.F.R. § 1081.402(c).

7
PHH’s Options for Further Review: Reconsideration or Appeal
PHH now faces two possible avenues for further review. First, it can seek reconsideration
from the Director within 14 days of the decision. 12 C.F.R. § 1081.406. Such reconsideration,
however, is limited to “new questions raised by the final decision … and upon which the
petitioner had no opportunity to argue.” Id. Given the extensive briefing of the contested
matters at issue, reconsideration does not appear to be a promising course of action for
PHH. Its second avenue of review is to seek judicial review either in the D.C. Circuit or in the
3rd Circuit—where PHH’s principal office is located. 12 U.S.C. § 5563(b)(4). Any such
appeal must be filed within 30 days of the CFPB’s order. Id. And, indeed, the company has
indicated it plans to pursue such an appeal.
PHH Can Pay Into Escrow Pending Appeal
The CFPB’s Rules provide that final orders are effective 30 days from the date of issuance,
and that filing an appeal does not operate as a stay. 12 C.F.R. § 1081.407(e); see also 12
U.S.C. § 5563(b)(5). In his decision, the Director provided that if PHH appeals the order to
the Court of Appeals, it can choose to pay the disgorgement amount into an escrow account.
PHH at 37. He did not, however, provide for any stay of the injunctive provisions of the order,
and it appears unlikely he would grant such a stay pending appeal. See 12 C.F.R. §
1081.407. Absent a stay by the Court of Appeals, the injunctive provisions—including rather
onerous record-keeping provisions—will take effect early next month. Allowing PHH to pay
the disgorgement amount into an escrow account pending appeal seems designed to limit
the likelihood of the Court of Appeals granting a stay of that aspect of the CFPB’s order.
Standard of Review on Appeal & the Rule of Lenity: Deference or Not?
While PHH is entitled to judicial review, that review, unlike the Director’s review of the ALJ
decision, may not be de novo. Rather, in the ordinary course, the Court of Appeals would
likely afford substantial deference to the CFPB’s legal determinations interpreting the statute
at issue and its implementing regulations. See generally Chevron v. Natural Resources
Defense Council, 467 U.S. 837 (1984). While the CFPB’s factual findings will have to be
supported by substantial evidence, 5 U.S.C. § 706(2)(E), its legal interpretations made in the
course of an adjudication proceeding would ordinarily be afforded deference and upheld
unless they are arbitrary and capricious. 5 U.S.C. § 706(2)(A); see United States v. Mead
Corp., 533 U.S. 218, 230 (2001).
One possible basis to avoid such deference in this case is the rule of lenity, which provides
that ambiguities in criminal statutes should be interpreted in favor of defendants. As Justice
Scalia has recently noted, there is a question as to whether Chevron deference should be
applied to statutes such as RESPA that contain both civil and criminal prohibitions, in light of
the rule of lenity and the courts’ role in interpreting criminal statutes. Whitman v. United
States, 574 U.S. __ (2014) (Scalia, J., statement respecting denial of certiorari); see also
Carter v. Welles-Bowen Realty, Inc., 736 F.3d 722, 729 (6th Cir. 2013) (discussing
application of rule of lenity to RESPA) (Sutton, J., concurring). Director Cordray summarily
rejected PHH’s argument that the rule of lenity compelled adoption of PHH’s interpretation of
RESPA section 8(c)(2). PHH at 20. Notwithstanding having spent five pages articulating his
interpretation of that provision and disavowing and distinguishing a prior HUD letter
regarding the same issue—suggesting that alternative interpretations are at least plausible—
the Director concluded in a single sentence that the rule of lenity does not apply because

8
“the text, structure and goals of section 8(c)(2) and RESPA as a whole” did not leave any
ambiguity as to its meaning. PHH at 20. A reviewing court might well disagree as to the
possible ambiguities in Section 8(c)(2). Rather than affording deference to the agency’s
interpretation of such ambiguous statutory provisions, the Court might instead determine that
the rule of lenity applies, and adopt the interpretation most favorable to PHH. This appears to
be an area of substantial risk for the CFPB on appeal, given the judicial interest shown in this
issue and the novelty of the CFPB’s interpretation. The same is true in varying degrees with
respect to the other statutory and regulatory interpretations discussed above.
Disgorgement Based on Gross Revenue
Reversing the ALJ, Director Cordray also ordered PHH to disgorge all of the reinsurance
premiums that it received since July 21, 2008, without deduction for claims actually paid to
the mortgage insurers. PHH at 33-34. The Director grounded this decision on the principal
that disgorgement is based on ill-gotten gains, as opposed to ill-gotten profit, and that the
wrongdoer is not entitled to offset expenses incurred in the course of its illegal conduct.
Unless it is reversed on appeal, this broad view of disgorgement is likely to have
ramifications in other CFPB enforcement actions, as the CFPB Enforcement staff is likely to
seek such disgorgement in other cases where it cannot obtain consumer restitution. The
notion that it is improper to deduct expenses incurred by a party in the course of the conduct
that the CFPB believes to be illegal is thus likely to make its way into CFPB settlement
demands as well as its demands in contested litigation.
No Civil Money Penalty
Among the more surprising aspects of Director Cordray’s decision is his determination that
civil money penalties are not appropriate. For an agency that has aggressively pursued such
penalties in most of its enforcement actions, the Director’s decision to forgo penalties in this
case is notable. In reaching this determination, Director Cordray noted that penalties were
only available for payments received by PHH after July 21, 2011 (the effective date of the
Dodd-Frank Act), and that “the vast majority of PHH’s conduct over the period encompassed
by its reinsurance agreements” preceded that date. PHH at 38. He also determined that the
award of disgorgement was a “just and sufficient remedy” to fulfill the CFPB’s goals. Id.
On the one hand, the Director’s decision seems uniquely limited to the facts and procedural
posture of the case at hand—where he had already imposed monetary remedies nearly 17
times that ordered by the ALJ, and where the vast majority of the conduct at issue was not
subject to penalties because it predated the Dodd-Frank Act. Facing the likelihood of appeal,
declining to impose civil money penalties was a way to mitigate the magnitude of his
departure from the ALJ’s order, without adopting precedential legal positions that would
impact future CFPB cases. On the other hand, the Director specifically noted that some of
the statutory factors governing the imposition of penalties did not favor mitigation (including
PHH’s size, lack of good faith, and the gravity of the violations), PHH at 37, yet he still
declined to impose any penalties. Parties involved in CFPB enforcement proceedings should
use this precedent to argue that civil money penalties are not appropriate in their case,
because other remedies are sufficient to achieve the CFPB’s goals.

9
More Captive Reinsurance Cases?
To date, the CFPB has settled with five different mortgage insurers involved in captive
reinsurance arrangements. The case against PHH was the CFPB’s only action involving a
mortgage lender/reinsurer. Other mortgage lenders/reinsurers who were involved in the
captive reinsurance arrangements that were the subject of the CFPB settlements may be on
the CFPB’s radar screen. The CFPB Enforcement staff may now feel emboldened by the
Director’s decision to pursue these additional parties. On the other hand, given PHH’s
impending appeal, and the CFPB’s position that there is no statute of limitations applicable to
administrative RESPA cases, those other parties may push back against CFPB efforts to
take action against them before the Court of Appeals has a chance to rule on the myriad
issues discussed above. It will be interesting to see whether the CFPB brings any additional
cases in this area before PHH’s appeal is finalized.
Conclusion
Director Cordray has sent a clear message that he intends to exercise the full scope of his
authority as the final decision maker in contested administrative litigation brought by the
CFPB. While parties still must develop a factual record and present legal arguments to the
ALJ in such cases, it is clear that the Director will not necessarily afford deference to either
the factual determinations or legal conclusions made by the ALJ. And while the Director took
two notable positions in favor of PHH—holding that the continuing violation doctrine does not
apply and declining to impose civil money penalties—his decision as a whole is consistent
with the CFPB’s approach to interpret the laws it is charged with enforcing in a manner most
favorable to consumers. Thus, Director Cordray’s rulings as to of the applicable statute of
limitations, the accrual of RESPA claims, the definition of referral, and, most importantly, the
scope of Section 8(c)(2) of RESPA all represent an expansive view of the agency’s authority
in this area. PHH’s appeal will have ramifications on two fronts—both the CFPB’s
interpretation of RESPA and the CFPB’s administrative authority in general. Depending on
the substance and tone of the ruling, it could have important ramifications for the CFPB’s
enforcement of RESPA and its conduct of administrative proceedings in the years to come.
Author:
Ori Lev
ori.lev@klgates.com
+1.(202) 778-9058

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David A. Tallman david.tallman@klgates.com +1.214.939.4946
Miami
Paul F. Hancock paul.hancock@klgates.com +1.305.539.3378
New York
Elwood F. Collins elwood.collins@klgates.com +1.212.536.4005
Pittsburgh
Melissa J. Tea melissa.tea@klgates.com +1.412.355.8385
San Francisco
Jonathan Jaffe jonathan.jaffe@klgates.com +1.415.249.1023
Seattle
Holly K. Towle holly.towle@klgates.com +1.206.370.8334
Sydney
Andrea P. Beatty andrea.beatty@klgates.com +61.2.9513.2333
Washington, D.C.
Costas A. Avrakotos costas.avrakotos@klgates.com +1.202.778.9075
David L. Beam david.beam@klgates.com +1.202.778.9026
Emily Booth-Dornfeld emily.booth@klgates.com +1.202.778.9112
Melanie Brody melanie.brody@klgates.com +1.202.778.9203
Holly Spencer Bunting holly.bunting@klgates.com +1.202.778.9853
Soyong Cho soyong.cho@klgates.com +1.202.778.9181
Krista Cooley krista.cooley@klgates.com +1.202.778.9257
Daniel F. C. Crowley dan.crowley@klgates.com +1.202.778.9447
Eric J. Edwardson eric.edwardson@klgates.com +1.202.778.9387

Consumer Financial Services Practice Contact List
Jon Eisenberg jon.eisenberg@klgates.com +1.202.778.9348
Shanda N. Hastings shanda.hastings@klgates.com +1.202.778.9119
Steven M. Kaplan steven.kaplan@klgates.com +1.202.778.9204
Phillip John Kardis II phillip.kardis@klgates.com +1.202.778.9401
Kris D. Kully kris.kully@klgates.com +1.202.778.9301
Rebecca H. Laird rebecca.laird@klgates.com +1.202.778.9038
Ori Lev ori.lev@klgates.com +1.202.778.9058
Michael J. Missal michael.missal@klgates.com +1.202.778.9302
Laurence E. Platt larry.platt@klgates.com +1.202.778.9034
Stephanie C. Robinson stephanie.robinson@klgates.com +1.202.778.9856
Phillip L. Schulman phil.schulman@klgates.com +1.202.778.9027
Kerri M. Smith kerri.smith@klgates.com +1.202.778.9445
Stephen G. Topetzes stephen.topetzes@klgates.com +1.202.778.9328
PROFESSIONALS
Government Affairs Advisor / Director of Licensing
Washington, D.C.
Stacey L. Riggin stacey.riggin@klgates.com +1.202.778.9202
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K&L Gates comprises more than 2,000 lawyers globally who practice in fully integrated offices located on five
continents. The firm represents leading multinational corporations, growth and middle-market companies, capital
markets participants and entrepreneurs in every major industry group as well as public sector entities, educational
institutions, philanthropic organizations and individuals. For more information about K&L Gates or its locations,
practices and registrations, visit www.klgates.com.
This publication is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in
regard to any particular facts or circumstances without first consulting a lawyer.
© 2015 K&L Gates LLP. All Rights Reserved.

PHH - Consumer Financial Services Alert 22 June 2015 FINAL

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