CFPB Attempts A Regulatory Coup

The attempt of the holdover leadership of the CFPB to extend its reign over the Bureau is the type of legal maneuver that lawyers love and that makes everyone else hate lawyers. At the end of the day, what the CFPB and its most zealous supporters will accomplish is nothing more than to underscore that the Bureau is an out of control Bureaucracy in desperate need of reform.

When Richard Cordray announced that he was leaving the Bureau at the end of the month, speculation surfaced immediately that the trump administration would name former Congressman and current OMB Director Mick Mulvaney as its Acting Director. Considering that Mulvaney has been an outspoken foe of the Bureau, supporters of the Bureau were understandably upset; but in the words of our previous President, “Elections have consequences.”

Fast forward to Friday. Director Cordray apparently was so anxious to get a jump on his Black Friday shopping that he announced that Leandra English who had previously served as the Chief of Staff as his Deputy Director. When Cordray announced his departure, he effectively designated her as his successor until his five-year term ends in July. In a statement explained that “we will continue to benefit from Leandra’s in-depth knowledge of the operational needs of this agency and its staff.” The White House responded with a statement naming Mulvaney as the Acting Director. English has already filed a lawsuit seeking to block Mulvaney from taking up this position.

Now here’s the part that the lawyers love. The CFPB zealots have a good faith argument. Specifically, they argue that under the Dodd Frank Act, the Deputy Director becomes the Acting Director “in the absence or unavailability of the Director.” The problem with this logic is that it is questionable that a voluntary departure constitutes the type of absence envisioned by this provision. In addition, the statute is only relevant if it is not preempted by a competing Federal statute, the Federal Vacancy Reform Act. While this issue has never been litigated, the Trump Administration released a memo from the CFPB’s General Counsel in which he opined that the President had the power to make the interim appointment and that CFPB staff should recognize Mulvaney as the Acting Director.

Let’s take off our ideological blinders and use some common sense here. Does anyone really believe that an unelected Director of a self-funded agency with no Board of Directors consistent with the Constitution exercise greater authority to appoint his successor, then can the President of the United States? Not in my copy of the Constitution.

And besides, what is it the Bureau holdovers truly hope to accomplish? In a best case scenario, Ms. English stays in her job until July. At some point, a new Director will be named who will take the Bureau in a vastly different direction. After all, elections have consequences.

In the long-term, all that this litigation will do is create greater confusion about what regulations should be implemented and how they should be interpreted.