Following Richard Cordray’s resignation from his role as Director of the Consumer Financial Protection Bureau (CFPB), two people are clamoring to assume his post. Leandra English, formerly the CFPB’s Chief of Staff and promoted to Deputy Director by Cordray at the Eleventh Hour, asserts she is the rightful acting director, according to procedure established in the 2010 Dodd-Frank and Wall Street Reform Act. Meanwhile, President Trump named Mick Mulvaney, Director of the Office of Management and Budget (OMB), acting director, according to procedure established in the 1998 Federal Vacancies Reform Act. The acting director would serve in the interim while the President appoints a permanent director, which the Senate must confirm in a simple majority vote.
English, who has helped lead the Bureau since its inception in 2011, and Mulvaney, who once called the Bureau a “sick, sad joke”, embody widely different visions regarding the future of the agency.
The agency’s founding purpose was to empower a single regulator to protect financial consumers in an area where consumers’ vulnerability from predatory financial products and services — often perpetrated by powerful institutions — is high and consumers have little recourse if wronged. The agency has won numerous successes, including reforming mortgage lending, curtailing abusive debt collection practices, and investigating hundreds of thousands of complaints from aggrieved customers of financial institutions.
In spite of, or perhaps because of, the CFPB’s track record of success, it has attracted many opponents, including the person President Trump has tapped to head the Bureau in the interim. “I don’t like the fact that the CFPB exists”, Mulvaney said in 2015 at a House hearing; while serving as a Republican congressman, he also co-sponsored legislation to eliminate the agency. President Trump will likely appoint a permanent director that, like Mulvaney, is hostile to the CFPB’s basic mission.
Politics aside, legislative analysis has produced mixed understanding of who should serve in the interim. Press Secretary Sarah Huckabee Sanders said that the legality of Mulvaney’s appointment was confirmed by the White House counsel’s office, the Justice Department, and the agency’s own general counsel, who was appointed by Mr. Cordray. However, others, including Senator Elizabeth Warren, architect of the CFPB, defended English as the rightful acting director. “Dodd-Frank is quite specific: It provides its own succession planning”, Warren said. “There is no vacancy for President Trump to fill”. Though on Twitter she did affirm the President’s authority to appoint a permanent director.
On their first day of work, in emails to staff, both English and Mulvaney signed off as “Acting Director”.
The controversy over whether English or Mulvaney is the rightful acting director centers on two statutory provisions within the Federal Vacancies Reform Act and the Dodd-Frank and Wall Street Reform Act. 5 U.S.C § 3345 (part of the Federal Vacancies Reform Act) and 12 U.S.C. § 5491 (part of the Dodd-Frank Act) appear to contain contradictory language; and a legal battle has commenced regarding which Act supersedes the other.
The argument that Mulvaney is the rightful acting director of the CFPB rests on 5 U.S.C. § 3345, which provides that when a Senate-confirmed officer in an executive agency “dies, resigns, or is otherwise unable to perform the functions and duties of the office”, the First Assistant to that office automatically becomes the acting officer, unless the President designates someone else.
The argument that English is the rightful acting director of the CFPB rests on 12 U.S.C. § 5491, which provides that the Deputy Director of the CFPB shall “serve as acting director in the absence or unavailability of the Director”.
Critics have argued that “absence” and “unavailability” do not describe a vacancy caused by a director’s resignation. Though the language may be vague, some have indicated that the current language replaced former language which expressly deferred to the Federal Vacancies Reform Act. Adam Levitin, a law professor at Georgetown University, argued that the legislative history of Dodd-Frank supplies that English is the rightful acting director. Levitin writes:
The version of the Consumer Financial Protection Act that originally passed the House was very clear that the Federal Vacancies Reform Act applied. It stated that “In the event of vacancy or during the absence of the Director (who has been confirmed by the Senate pursuant to paragraph (2)), an Acting Director shall be appointed in the manner provided in section 3345 of title 5, United States Code.” Section 3345 of title 5 is the Federal Vacancies Reform Act. The quoted language didn’t make it into the enacted version of the legislation. Instead, the conference committee that reconciled the House and Senate bills adopted the language in the Senate bill, about “absence or unavailability.” In other words, Congress knew very well how to say that the Federal Vacancies Reform Act applies … but ultimately decided that it would not apply.
At the heart of the controversy lays another dispute. More broadly, the independence of financial regulators is at stake. Although critics have long derided the organizational structure of the CFPB, which vests power in a single director, it was designed to be an independent agency. Brookings published an article asserting that by appointing a senior White House official to head the CFPB, even in the interim, President Trump undermined one of the basic principles of modern financial regulation: the independence of financial regulators. The CFPB is part of the Federal Reserve System and is a voting member of other key financial regulators; considering this, the pro-English camp argued that it may be illegal for the Director of the OMB to concurrently serve as the Director of the CFPB.
The fisticuffs taking place at the Bureau recently made its way to the courtroom. On Sunday, English filed a lawsuit against Trump and Mulvaney calling for a temporary restraining order to block Mulvaney from taking over. The suit, English v. Trump, was assigned to Judge Timothy Kelly, a Trump appointee confirmed by the Senate 94-2 in September. On Tuesday, Kelly denied the temporary restraining order siding with the Trump administration in the legal fight. “Denying the President’s authority to appoint Mr. Mulvaney raises significant constitutional questions”, Kelly said. He continued by explaining that nothing in the statutes expressly forbids Mulvaney from holding both CFPB and OMB Director positions.
Deepak Gupta, English’s lawyer, acknowledged the “loss”, but promised the ruling would “not be the final answer”. Regardless of the outcome of the legal battle currently underway, a protracted struggle is likely to occur between CFPB critics and advocates when President Trump appoints a permanent CFPB Director. We can only hope they are a champion for consumers, not a Wall Street crony.