In addition to its implications for CFPB rulemaking, the D.C. Circuit’s decision in PHH Corporation v. CFPB has significant implications for the CFPB’s authority to enforce federal consumer financial protection laws as well as the Consumer Financial Protection Act (CFPA) prohibition of unfair, deceptive, or abusive acts or practices (UDAAP).

In its decision, the D.C. Circuit ruled not only that the CFPB’s single-director-removable-only-for-cause structure is unconstitutional but also ruled that RESPA’s three-year statute of limitations (SOL) applies to CFPB administrative enforcement actions.  According to the court, when using it authority under Section 5563 of the CFPA to conduct hearings and adjudication proceedings to enforce a federal consumer financial protection law as to which it has enforcement authority, the CFPB is subject to any limits in such law, such as a SOL.  It stated that “[b]y its terms, then, Section 5563 ties the CFPB’s administrative adjudications to the statutes of limitations of the various federal consumer protection laws it is charged with enforcing.”

RESPA’s SOL provides that “actions brought by the Bureau, the Secretary [of HUD], the Attorney General of any State, or the insurance commissioner of any State may be brought within 3 years from the date of the occurrence of the violation.”  Not only did the court reject the CFPB’s argument that RESPA’s SOL did not apply to administrative enforcement actions, it also rejected the CFPB’s argument that by its terms, RESPA’s three-year SOL was limited to court actions.  The court concluded that the reference to “actions” in RESPA’s SOL includes both CFPB RESPA enforcement actions brought administratively and those brought  in court.

The court’s statement that Section 5563 “ties the CFPB’s administrative adjudications to the statutes of limitations of the various federal consumer protection laws it is charged with enforcing” has implications for attempts by the CFPB to avoid the SOLs of federal consumer financial protection laws other than RESPA.  Indeed, the court specifically noted that the CFPB’s argument that it was not bound by RESPA’s SOL “would extend to all 19 of the consumer protection laws that Congress empowered the CFPB to enforce” and cited to the CFPB’s administrative enforcement action against Integrity Advance, LLC in which the CFPB’s Administrative Law Judge (ALJ) found that the CFPB was not bound by the TILA or EFTA SOLs.  The respondents in that case filed a motion to stay their appeal of the ALJ’s decision and for their case to be remanded to the ALJ for reconsideration in light of the D.C. Circuit’s PHH decision.  The motion was denied by Director Cordray who, in an order issued on October 31, 2016, stated that he “was fully able to address [the respondents’] arguments about the appropriate statute of limitations in this appeal” and that he had “extended the briefing schedule sua sponte to ensure that the parties would have a full opportunity to present arguments on the impact (if any) of the D.C. Circuit’s decision in PHH v. CFPB.”

In addition to the ALJ’s finding in Integrity Advance that the CFPB was not bound by the TILA and EFTA SOLs, the ALJ found that the three-year SOL in Section 5564(g)(1) for actions to enforce the CFPA did not apply to the CFPB’s UDAAP claims. Section 5564(g)(1) provides that “[e]xcept as otherwise permitted by law or equity, no action may be brought under this title more than 3 years after the date of discovery of the violation to which an action relates.”  In rejecting the CFPB’s reading of “actions” in RESPA’s SOL, the D.C. Circuit observed that “[t]he Dodd-Frank Act repeatedly uses the term “action” to encompass court actions and administrative proceedings” and cited to various Dodd-Frank sections as examples.  Assuming the term “action” in Section 5564(g)(1) would similarly be read to encompass court actions and administrative proceedings, the CFPB would be bound by the provision’s three-year SOL, including its discovery rule, when bringing administrative actions to enforce its UDAAP authority.

The implications of the SOL issues for the CFPB’s exercise of its enforcement authority could include the fast-tracking of enforcement matters and greater use of its UDAAP authority for conduct that violates a federal consumer financial protection law with a SOL that is less than 3 years.  We will be watching to see how Director Cordray addresses the respondent’s TILA, EFTA and UDAAP SOL arguments when he rules on Integrity Advance’s appeal.