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Trump And Cordray Throw CFPB Leadership In Disarray

The Consumer Financial Protection Bureau was mixed up a bit Friday, leaving the CFPB leadership in disarray, when outgoing Director Richard Cordray and President Donald Trump named different interim leaders for the bureau upon Cordray’s departure.

Cordray on Friday promoted longtime CFPB staffer Leandra English to the position of deputy director, just minutes before he announced that Friday would be his last day. Under a provision of the 2010 Dodd-Frank Act, which created the CFPB, the deputy director would serve as acting director of the bureau until a new director was confirmed by the Senate.

Hours later, Trump named Office of Management and Budget Director Mick Mulvaney, an avowed opponent of the CFPB, to serve as the acting director under the Federal Vacancies Reform Act.

The end result is that the CFPB now has two acting directors named under competing statutes, leaving any action taken by the CFPB subject to legal challenge from all sides until the leadership question is sorted out — or until Trump gets a nominee to take on the CFPB’s directorship through the Senate.

That could take months.

Already, both sides are gearing up for a court fight over the CFPB’s temporary leadership.

“It is now up to the courts to sort this out. I’m not sure who will sue whom. In the meantime, I suspect that things at the CFPB will grind to a screeching halt,” said Alan Kaplinsky, the co-leader of Ballard Spahr LLP’s consumer financial services practice.

A senior White House official on Saturday said that the administration had consulted with the Office of Legal Counsel, the U.S. Department of Justice office that provides legal advice to the executive branch, about the move to appoint Mulvaney. The OLC said that Trump had the authority to do so, and that a formal legal opinion was on its way.

“We have gone out of our way to avoid an unnecessary legal battle with Mr. Cordray,” the senior administration official said, a reference to Trump’s decision not to fire Cordray while questions over the president’s authority to do so was unclear. “His actions clearly indicate that he is trying to provoke one.”

Cordray, who had announced plans to resign from his post as the CFPB’s director on Nov. 15, said Friday that longtime bureau staffer Leandra English would be promoted to deputy director, leaving her in charge of the bureau.

“As deputy director, we will continue to benefit from Leandra’s in-depth knowledge of the operational needs of this agency and its staff,” Cordray said in a statement just minutes before he announced his formal departure from the CFPB.

Dodd-Frank set up a process whereby the CFPB’s deputy director would serve as acting director should there be a vacancy at the top of the bureau.

The problem for Cordray and the CFPB’s supporters was that until Friday there was no formal deputy director at the CFPB. That role was filled on an interim basis by David Silberman, the CFPB’s associate director for research, markets and regulations.

Silberman will continue in that role with English serving as the deputy director, Cordray said.

In a Friday memo to staff, Cordray cited the pertinent section of the law that created the CFPB — Dodd-Frank’s section 1011(b)(5) — for the promotion of English to be first the bureau’s deputy, then its acting director.

“In considering how to ensure an orderly succession for this independent agency, I determined that it would be best to avoid leaving this key position filled only in an acting capacity,” Cordray’s memo said.

English is a longtime CFPB staffer who has served several positions within the bureau stretching back to the days when the CFPB was being built from scratch, and has worked at the Office of Management and Budget and Office of Personnel Management.

Soon after Cordray made his move to at least temporarily protect the agency he led since a controversial 2012 recess appointment and subsequent confirmation in 2013, Trump stepped in to tap Mulvaney as acting CFPB director under the Federal Vacancies Act.

“The president looks forward to seeing Director Mulvaney take a common sense approach to leading the CFPB’s dedicated staff, an approach that will empower consumers to make their own financial decisions and facilitate investment in our communities,” the White House said in a statement.

In a memo dated Saturday and signed by Assistant Attorney General Steven A. Stengel, the Office of Legal Counsel said the president had the right to use the Federal Vacancies Reform Act to appoint Mulvaney acting director, even though it acknowledged that Dodd-Frank had set up a method for putting an acting director in place.

The memo noted that the VRA only provides exemptions for agencies that are multi-member commissions, an exception that does not pertain to the CFPB because of its single-agency structure.

In addition, while Dodd-Frank set up a provision for the deputy director to become the acting director should the post of CFPB director be vacated, the 2010 financial reform law works alongside the VRA, the OLC memo said.

And in such instances, the president’s authority outweighs that of any mechanism set up by Dodd-Frank, the OLC said.

“And, as with other office-specific statutes, when the president designates an individual under the Vacancies Reform Act outside the ordinary order of succession, the president’s designation necessarily controls. Otherwise, the Vacancies Reform Act would not remain available as an actual alternative in instances where the office-specific statute identified an order of succession, contrary to Congress’s stated intent,” the memo said.

Although Mulvaney would only serve as the acting CFPB director until a permanent replacement is confirmed by the Senate, supporters of the CFPB fear that he could do a lot to neuter the bureau.

Mulvaney is a longtime foe of the CFPB who has said publicly that the bureau, created in the 2010 Dodd-Frank Act, is a “sad, sick joke.”

Consumer groups are holding out hope that they will be able to prevail, and that English will serve as the CFPB’s acting director, given the weight of the mechanism set up by Dodd-Frank.

“Fortunately, the statute creating the CFPB says that the agency’s deputy director serves as acting director until a new director has been nominated by the president and confirmed by the Senate,” Lisa Donner, the executive director of Americans for Financial Reform, said in a statement.

Despite all of Cordray and Trump’s maneuvering, the D.C. Circuit may in the end have the final say given litigation pending before the court.

The D.C. Circuit is currently in the middle of an en banc review of litigation that could give Trump the ability to fire the CFPB’s director at will rather than for cause, as is mandated under Dodd-Frank.

If the court rules that the CFPB director can be fired at will — the official position of the administration — then Trump could have the ability to put Mulvaney in place at the CFPB regardless of the succession plan set up by Dodd-Frank.

More immediately, there is uncertaint as to what will happen with the CFPB when its doors open Monday. There had been some questions about whether both English and Mulvaney would be in the bureau’s Washington offices.

A senior administration official on Saturday said that both were expected to be there, but with Mulvaney serving as the acting director and English as his deputy.

“There’s a very good chance that Mulvaney will come in on Monday morning and things will go on in the regular course,” the official said.

The above was reported by Law360

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