Class Action Settles Alleged Kickback Scheme with PHH Corp. for $17 Million

A California class action against PHH Corp. and Realogy alleging an elaborate kickback scheme to funnel referrals to subsidiaries in violation of the Real Estate Settlement Procedures Act has settled for $17 million. The settlement does not include an admission of wrongdoing by the companies. PHH paid out a similar settlement of $18 million in a New Jersey class action earlier this year for the charging of certain lender-placed insurance policies.

PHH, a mortgage service provider based in New York, is currently defending a claim by the Consumer Financial Protection Bureau (CFPB) for issues similar to the California class action. Last year the company countered that the single, independent director structure of the agency was unconstitutional. Originally, a 3-judge panel on the D.C. Circuit Court agreed with the mortgage company and found the CFPB’s structure violated the U.S. Constitution, reasoning: “The CFPB’s concentration of enormous executive power in a single, unaccountable, unchecked Director not only departs from settled historical practice, but also poses a far greater risk of arbitrary decisionmaking and abuse of power, and a far greater threat to individual liberty.”. That decision was later vacated in favor of an en banc review of the case. The U.S. Department of Justice has reversed course in the interim and sided with PHH. The en banc D.C. Circuit has not provided a timeframe for its decision.