Trump’s New Pick for CFPB Director Greeted with Lawsuit

December 19, 2017 by David Basen

President Trump’s choice for interim director at the Consumer Financial Protection Bureau (CFPB), Mick Mulvaney, entered the building Monday apparently quite confident in his mandate. However, on Friday, Director Richard Cordray, a Democrat, had already promoted his deputy director, Leandra English to the position as he resigned from the federal watchdog agency.

The string of events led to an awkward moment on Monday, as English sent out an early morning email to her staff and signed it as “Acting Director.” As Mulvaney entered the building at 7:20 AM and took a seat in the director’s office, English was nowhere to be seen. She was instead filing a lawsuit in Federal Court trying to prevent Mulvaney from being promoted to the position by the president.

In a victory for President Trump, U.S. District Judge, Timothy J. Kelly, who was nominated by Trump earlier this year, denied a temporary restraining order requested by English in her lawsuit. The judge found that English had not proven the harm that would come to the agency if Mulvaney were to lead it until a new director is nominated and approved by Congress.

In a message to CFPB staff, Mulvaney asked them to “please disregard any instructions you receive from Ms. English in her presumed capacity as acting director.” In an interview later, Mulvaney said he had no intention of firing English, although he did note that she did not show up for work on Monday.

The dispute over who is the acting director is highly politicized, with lawmakers on both sides of the aisle offering their opinion on who should be leading the powerful oversight agency.

Under the Federal Vacancies Reform Act of 1998, the president is allowed to fill vacant positions with a person who has already been confirmed by the Senate. Mr. Mulvaney is the acting OMB director and has already passed Senate confirmation. For the time being, he will run both agencies until a replacement is nominated.

Democrats argue that under the Dodd-Frank Act – the financial reform law which created the agency – the law states that the deputy director shall “serve as acting director in the absence or unavailability of the director.”

However, the Trump administration argues that Federal Vacancies Reform Act supersedes Dodd-Frank, allowing him to appoint Cordray’s temporary replacement.

Press Secretary Sarah Huckabee Sanders said that the DOJ’s Office of Legal Counsel agreed with the president’s position, as did the bureau’s legal counsel, Mary McLeod.

In a memo to the bureau’s senior leadership on Saturday, McLeod said that it was her opinion that Trump has the legal authority to appoint an acting director. She went on to advise CFPB personnel to “to act consistently with the understanding that Director Mulvaney is the acting director of the CFPB.”

One of the key architects of Dodd-Frank, Barney Frank (D-MA), said that the intention of the law was clear about the deputy director assuming responsibility in the director’s absence.

Frank said that when crafting the bill, lawmakers wanted to ensure that the agency had “as much insulation as possible” from the political process. He added that he believes the acting director provision of Dodd-Frank was intended to prevent presidential appointments and political interference.

Ms. English filed the lawsuit in her capacity as a private citizen, naming both Trump and Mulvaney in the suit filed in U.S. District Court for the District of Columbia.

English’s attorney, Deepak Gupta issued a statement saying, “The president’s interpretation of the FVRA cannot be reconciled with Dodd-Frank’s mandatory language. Where the two statutes conflict, Dodd-Frank controls as the later-enacted, more specific statute.”

“The president may not, consistent with the statutory requirement of independence, install a still-serving White House staffer as the acting head of an independent agency — particularly when doing so would displace an acting head who has a clear legal entitlement to the position,” the complaint stated.

Judge Kelly disagreed, ruling that Trump has the right to appoint Mick Mulvaney as the interim Director.

“Denying the president’s authority to appoint Mr. Mulvaney raises significant constitutional questions, Kelly said in his decision. “Nothing in the statutes prevents Mr. Mulvaney from holding both of these positions.”

Both sides agree that the president has the right to appoint a new director, but Democrats hope that they can force Trump’s hand to nominate a new director quickly before Mulvaney has an opportunity to change the direction of the agency.

Republican Mitch Mulvaney has been a long-time critic of the agency, even referring to it as a “joke” and indicating that he “would like to get rid of it.” The Trump administration has been critical of the CFPB from the beginning, saying that the bureau has been too aggressive and unchecked in its regulatory capacity and that the approach had limited consumer’s access to credit and made it more difficult for financial services companies to offer new products.

Since 2011, the agency has provided consumer refunds of more than $12 billion, including mortgage reductions, foreclosure prevention, and other relief from financial institutions.

On Monday, consumer advocate groups and demonstrators gathered outside the CFPB headquarters to protest Mulvaney’s first day.

Mulvaney took immediate action in his new position, by placing a 30-day hold on any new regulations being released by the agency.

“It’s creating chaos at the agency,” said Alan S. Kaplinsky, head of the consumer financial services group at the Ballard Spahr law firm. “Who are the employees supposed to listen to?”

“Until things get clarified by the courts, I don’t think they should do anything other than to give out donuts to their employees and make sure they don’t leave,” he said.

Kaplinksy added that whoever is deemed to be the acting director, they should resist taking any regulatory steps that could be legally challenged due to the dispute.