Credit unions, pay attention: The CFPB’s very existence may violate the U.S. Constitution. 

A U.S. Court of Appeals did not quite declare the CFPB unconstitutional, but in an April 12 hearing challenging a CFPB penalty leveled at PHH Mortgage, the court engaged in a line of questions that cast doubts on the constitutional basis for the CFPB. This not only surprised many observers but sets up a potentially explosive ruling that could significantly pare back the CFPB’s presence and authority in the regulatory arena.  

To review the bidding: Mortgage service provider PHH challenged a June 2015 CFPB decision calling for the disgorgement of $109 million in revenue earned when the U.S. Department of Housing and Urban Development had jurisdiction over mortgage servicing activity under RESPA. PHH appealed this order, directly questioned the right of the CFPB to retroactively undo what had been previously legitimate business activity, and most significantly, disputed the constitutional validity of the CFPB. 

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