Future of CFPB up in the air amid power struggle

Richard Cordray, the first and only director of the CFPB, resigned on November 24, setting into motion a series of events that have created uncertainty over the agency’s future. Cordray, who developed the CFPB into an aggressive rule-making and enforcement agency, named long-time CFPB employee Leandra English as Deputy Director prior to his departure. In Cordray’s view, this made English the Acting Director of the CFPB upon his resignation. Hours later, however, President Trump appointed OMB Director Mick Mulvaney as Acting Director of the CFPB. This dispute set up a legal battle that is currently pending in court, the result of which will have significant affects on the CFPB’s regulatory activity.

After Trump appointed Mulvaney, English filed a lawsuit seeking to have a federal court recognize her as the CFPB’s Acting Director and to block Mulvaney’s appointment. The legal controversy centers on language in the Dodd-Frank Act’s succession plan that would make Deputy Director English the Acting Director in the event that the Director is “absent” or “unavailable.” According to English, this language preempts the authority the President ordinarily has to make temporary appointments under the Federal Vacancies Reform Act. The White House counters that the Federal Vacancies Reform Act applies and that, in any event, Cordray’s resignation does not make him “absent” or “unavailable” under Dodd-Frank.

Yesterday, Judge Timothy J. Kelly, a D.C. federal judge appointed by Trump, held a hearing to determine whether to grant English’s request for an injunction blocking Mulvaney’s appointment. English’s attorney argued that Dodd-Frank controlled and that Mulvaney should be disqualified from running the CFPB after he tried to disband the agency while in Congress. Judge Kelly was more interested in focusing on whether this was truly an emergency situation that required an immediate injunction. He heard arguments from both sides but has not yet issued a ruling.

This dispute is important because Mulvaney, a vocal critic of the CFPB, would likely reverse the course set by Cordray and significantly reduce the CFPB’s new regulations and enforcement activity. In a statement to the press, Mulvaney noted that Trump expected him to reel in the agency’s power, and he stated, “It is a completely unaccountable agency, and I think that’s wrong. That’s why I think we need structural and legislative changes to the way this agency is run.” In fact, Mulvaney already froze all new policymaking and new hiring.

As this dispute works its way through the courts, expect additional changes to the way the CFPB functions as a regulatory and enforcement agency.