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An Unaccountable Federal Agency Gets Slapped by the Supreme Court



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This week, the Supreme Court issued a unanimous decision in a rather innocuous case involving the Real Estate Settlement Procedures Act (RESPA). But this innocuous case shows that concerns over the new Consumer Financial Protection Bureau — that it will wield unparalleled powers with virtually no accountability — are quite well-founded.

The CFPB was set up by Dodd-Frank, one of the worst bills passed by Congress in recent years, which purported to statutorily place the agency outside of congressional oversight. Its statutory mandate is so vague that there are virtually no limits on what CFPB bureaucrats can do in the name of protecting consumers. Its regulatory authority is so expansive that it will be able to control all consumer money spending in the U.S. CFPB bureaucrats were given inordinate discretion to define their own powers — a situation virtually guaranteed to lead to an abuse of government regulatory authority.

In Freeman v. Quicken Loans, Inc., Justice Antonin Scalia delivered the opinion of the Court, ruling against the plaintiffs and against the position being argued by the government. You know that your legal position is extreme when all nine justices of the Supreme Court rule against you.

RESPA prohibits real estate and mortgage professionals from splitting charges for settlement services. The intent of the statute is to prevent “kickbacks or referral fees that tend to increase unnecessarily the cost of certain settlement services.” The plaintiffs were not claiming that Quicken Loans had split its fee; instead, the plaintiffs claimed that they had not received any services in exchange for the fees they paid. The Supreme Court held that this claim, even if true, did not violate RESPA because the language of the federal statute “unambiguously covers only” a settlement charge being split between two or more real estate or mortgage professionals.

Where the case gets interesting is if you look at the government’s position. This is the first Supreme Court case in which the newly minted CFPB has filed an amicus brief. The CFPB claimed that RESPA “unambiguously” prohibits “the acceptance of an unearned fee for rendering a real estate settlement service, whether or not the fee is shared with any other culpable actor.” Yet all nine justices of the Supreme Court — conservative, liberal, and swing — agreed that the exact opposite is true: The plain language of RESPA covers only the illegal splitting of a fee.

The CFPB seems to be taking the Lewis Carroll approach to statutory interpretation. As Humpty Dumpty scornfully told Alice, “When I use a word, it means just what I choose it to mean — neither more nor less.” Of course, Alice then said that the question was “whether you can make words mean so many different things.” But as Humpty Dumpty replied, “The question is which is to be master — that’s all.” Here, the CFPB apparently thinks it should be the master and that a clear and unambiguous federal statute should have the entirely different meaning its unaccountable bureaucrats choose it to have — neither more nor less.

Of course, this is the same agency that, thanks to an unconstitutional “recess” appointment by President Obama — is now headed by Richard Cordray. 

The Senate refused to confirm Cordray last December because of the serious concerns of a number of senators over the unchecked power of the CFPB. Given the unjustified (as so classified by no less than the Supreme Court) legal claims already being made by the CFPB, they were certainly right to be concerned.



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