Consumer Bureau Brushback
June 4 | Posted by mrossol | American Thought, The Left, US Constitution, US CourtsAre you serious? OK then,… 9-0
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Washington’s regulators have great power, and in the case of the Consumer Financial Protection Bureau, created by Dodd-Frank as an independent agency, they also have no serious Congressional check. So three cheers for a recent Supreme Court decision reining in regulatory discretion that has zero foundation in law.
And by the way, the decision was 9-0, with the Justices describing the Department of Housing and Urban Development’s aggressive assertion of its regulatory authority a “palpable overreach.” That’s a nice way of saying, you can’t be serious.
As often happens, this useful principle emerged from the arcana of a little-known 1974 federal law known as Respa, for the Real Estate Settlement Procedures Act. Respa forbids providers of real-estate services—title insurance, appraisals and the like—from taking kickbacks or splitting the fees they receive. In 2001 HUD quietly expanded the law’s reach by declaring it wasn’t limited to “situations where at least two persons split or share an unearned fee.”
This cued the plaintiffs bar, and before long Freeman v. Quicken Loans was headed to the Supreme Court. Three aggrieved married couples alleged that Quicken Loans had illegally split fees—with itself. The Solicitor General sided with them, arguing that HUD indeed had the right to interpret the statute, had done so properly, and the Court should give deference to its decision. Also chiming in was the senior litigator from the new consumer protection bureau, who was a signatory to the government’s amicus brief on the side of the plaintiffs. (The consumer bureau now enforces Respa, thanks to Dodd-Frank.)
The nine justices essentially laughed all these people out of court, upholding the idea that Congress makes laws and the bureaucracy implements them. Writing for the court, Justice Antonin Scalia declared the bureaucracy’s Respa interpretation was “manifestly inconsistent with the statute HUD purported to construe.” The law’s text “clearly describes two distinct exchanges,” he noted, not an exchange of fees of a company with itself.
In the unending battle against regulatory overreach, Freeman is a pretty big deal and has implications beyond the world of real-estate settlement. The Department of Justice, for example, is aggressively using so-called “disparate-impact” analysis, a type of statistical technique that ignores intent, to accuse financial institutions of discrimination under the 1968 Fair Housing Act and 1974 Equal Credit Opportunity Act. Neither law has text that supports these interpretations. Freeman suggests the Justices also would be inclined to curb these overreaches.
The Supreme Court’s ideological divisions over abortion and the like are well known. Let it be noted, however, that this Court does not look favorably on regulators unabashedly assuming the powers of lawmakers. Freeman sends a clear message to regulators to do the job they’re asked to do, and nothing more.
Review & Outlook: Consumer Bureau Brushback – WSJ.com.
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