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UPDATED: Who is Running the CFPB?

UPDATE to the original post below:

On November 28, 2017, U.S. District Judge Timothy Kelly denied Ms. English’s request for a temporary restraining order preventing President Trump from appointing Mr. Mulvaney as acting director of the CFPB. While the Court did not dismiss Ms. English’s Complaint, it did note that there was not a substantial likelihood that the case would succeed on the merits. The suit will now continue and the parties will submit briefs on the merits in the near future. The suit has also brought on an wave of amicus parties, including Senators Chuck Shumer and Elizabeth Warren, emphasizing the political nature of this dispute. Regardless of the eventual outcome of the suit, this matter will almost certainly be appealed. Overall, Judge Kelley’s refusal to grant injunctive relief establishes Mr. Mulvaney as the acting director for the time being. 

Original post:

November 27, 2017 - The Consumer Financial Protection Bureau (CFPB) has been the target of praise and condemnation from different demographics. Formed in 2010 as part of the Dodd-Frank Wall Street Reform Act, the CFPB staked out a position as a regulator to financial institutions and their related service industries in dealing with consumers and was given broad enforcement, investigatory and regulatory powers. The CFPB initially operated without a director until July 2011 when President Obama  nominated Richard Cordray, who initially served as director by virtue of a recess appointment due to political divisions within the Senate. Mr. Cordray was formally confirmed by the Senate in January 2013. Under Mr. Cordray’s direction, the CFPB has levied approximately $12 billion in fines and penalties against entities and individuals involved with various consumer financial services. Following the election of Donald Trump as president, many speculated that one of his first steps would be to restrain or re-order the CFPB. That time has now come, albeit with a certain degree of confusion.

On November 22, 2017, Mr. Cordray resigned as director of the CFPB. President Trump  advised he would appoint Mick Mulvaney, the director of the Office of Management and Budget, to serve as the interim director of the CFPB. Mr. Cordray, however, designated his chief of staff, Leandra English, to serve as acting director of the Bureau. Ordinarily, the president is entitled to oversee the management of federal agencies and appoint a director of his choosing. While that is still the case, there is a dispute as to whether he has the authority to select an interim or temporary director to serve until such time that a formal appointment is confirmed by the Senate. Ms. English has filed a lawsuit seeking a temporary restraining order to prevent President Trump from formally appointing Mr. Mulvaney, challenging that the president does not have authority to appoint an interim Bureau director. Instead, she argues that the Dodd-Frank Act gave the director of the CFPB complete authority to designate a temporary successor. Undercutting this position somewhat, however, is a legal memorandum from the CFPB’s general counsel disputing Ms. English’s claim and directing CFPB employees to act with the understanding that Mr. Mulvaney is the acting director.   

The CFPB exists in a unique realm from that of other federal agencies, as exemplified through the current dispute as to who is entitled to appoint the interim successor to Mr. Cordray. When it was created, the CFPB’s structure and place in the government drew criticism from many in that it was headed by one director, entitled to serve a five-year term and who could not be discharged absent special circumstances. Further, the CFPB was funded through the National Reserve, rather than Congress, thereby avoiding Congressional oversight. Thus, the Bureau operated independent from the checks and balances normally applied to government regulators, a fact implicitly acknowledged in a recent Circuit Court decision in PHH Corporation v. Consumer Financial Protection Bureau. In 2016, the Circuit Court of Appeals for the District of Columbia found that the leadership structure of the CFPB was unconstitutional stating that:  “Indeed, other than the President, the Director of the CFPB is the single most powerful official in the entire United States Government, at least when measured in terms of unilateral power."   

The fact that a colorable dispute exists over whether President Trump or the outgoing director of the CFPB, Mr. Cordray, has the power to designate an interim director exemplifies the heightened and protected position created for the CFPB through the Dodd-Frank Act. The outcome of Ms. English’s suit, the en banc appeal of the D.C. Circuit Court’s ruling and the eventual appointment of a permanent director will have a large impact on the future of the CFPB. President Trump has been clear that he intends to roll back the power and activities of the CFPB. However, that appears to be more difficult in practice to accomplish.   

A copy of Ms. English’s complaint can be found here

  • Partner

    Andrew Sayles defends financial institutions and their service partners in complex litigation and class actions, with a particular emphasis on issues related to consumer financial services regulation. He also advises clients in ...

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