CFPB Official Sues Trump Administration Over Agency Leadership

Leadership contest is the latest battle to control agency’s direction

Leadership contest is the latest battle to control agency’s direction

White House budget chief Mick Mulvaney is the president’s pick to be acting director of the Consumer Financial Protection Bureau.
White House budget chief Mick Mulvaney is the president’s pick to be acting director of the Consumer Financial Protection Bureau. PHOTO: PABLO MARTINEZ MONSIVAIS/ASSOCIATED PRESS

WASHINGTON—An Obama-era official at the Consumer Financial Protection Bureau sued the Trump administration on Sunday night to block budget director Mick Mulvaney from taking control of the agency.

Leandra English, a career staffer appointed Friday to lead the CFPB by former director Richard Cordray, filed the lawsuit in federal court the night before the bureau was set to reopen with dueling temporary leaders vying to take it over. In doing so, she touched off a legal fight that will trigger court interpretations on how different statutes regarding succession apply to the unusual struggle over control of a federal agency.

President Donald Trump asserts he has the power to appoint an acting director, while the departing chief believed the law said otherwise.

Last-minute maneuvering by Mr. Cordray means that come Monday morning, two officials have a claim on the acting top job: Mr. Mulvaney, who also serves as head of the Office of Management and Budget, and Ms. English.

The lawsuit, filed at the U.S. District Court for the District of Columbia, escalates the confrontation between the White House and the Obama-era leadership of the CFPB, an independent agency created after the financial crisis.



Ms. English, a former chief of staff, was appointed by Mr. Cordray as deputy director so she could assume the role of acting director of the agency under a provision in the Dodd-Frank financial law, which created the CFPB.

Calling herself the “rightful acting director” of the bureau, Ms. English is seeking a judgment and a temporary restraining order to prevent Mr. Mulvaney from becoming interim CFPB chief.

“Ms. English has a clear legal entitlement to the position of acting director of the CFPB,” the lawsuit said. “The president’s purported or intended appointment of defendant Mulvaney as acting director of the CFPB is unlawful.”

Mr. Trump’s appointment of Mr. Mulvaney, a harsh critic of the CFPB, is based on the Federal Vacancies Reform Act, which sets rules for vacant government agency positions and gives the president authority to appoint an acting director.

In a memo issued Saturday, the Justice Department argued the vacancies law gives the president power for “temporarily authorizing an acting official to perform the functions and duties” of the CFPB’s director. The department acknowledged that Dodd-Frank permits a properly appointed deputy to serve as temporary director, but that “doesn’t displace the president’s authority under the Vacancies Reform Act” to appoint an acting director.

The Consumer Financial Protection Bureau, or CFPB, has been a total disaster as run by the previous Administrations pick. Financial Institutions have been devastated and unable to properly serve the public. We will bring it back to life!

Ms. English wants the court to decide that the Federal Vacancies Reform Act doesn’t control the appointment of a temporary CFPB director and to block any temporary Trump appointment.

Deepak Gupta, a former CFPB lawyer who has sued the Trump administration previously, is the lead attorney representing Ms. English.

In a written statement, White House spokeswoman Sarah Huckabee Sanders said, “The administration is aware of the suit filed this evening by deputy director English. However the law is clear: Director Mulvaney is the acting director of the CFPB.”

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The White House also released a memo from CFPB General Counsel Mary McLeod in which she advised senior CFPB officials to “act consistently with the understanding that Director Mulvaney is the acting director of the CFPB.” The memo by Ms. McLeod, who was hired by Mr. Cordray, was dated Saturday.

The unfolding drama is the latest twist for the CFPB, which has been mired in partisan battles since the 2010 Dodd-Frank Act created the agency in the wake of the financial crisis. Democrat Elizabeth Warren, now a leading critic of Wall Street in the Senate, was the brain behind the agency’s birth. Many of the staff joined the agency as enthusiastic supporters of its mission.

Until the lawsuit was filed, CFPB officials had remained silent since Mr. Cordray’s announcement Friday on his resignation and Ms. English’s appointment. Agency spokesmen didn’t respond to repeated requests for comment. Neither Ms. English nor Mr. Cordray could be reached for comment.

The president has promised to install a more business-friendly leadership at the nation’s regulatory agencies. As acting director, Mr. Mulvaney would have full authority to implement changes at the bureau and is expected to do so aggressively.

The former Republican House member from South Carolina once called the CFPB a “sad, sick joke” and has called for an overhaul of the agency, including curtailing its budget. Other possible actions include delaying the enactment of a recently issued rule on payday lending, amending a 2013 mortgage rule that tightened underwriting standards, and reassessing pending lawsuits against companies such as student-loan servicer Navient Corp.

Mr. Mulvaney said in a statement Friday that “Americans deserve a CFPB that seeks to protect them while ensuring free and fair markets for all consumers.”

On Saturday, Mr. Trump called the Obama-era leadership of the agency a “total disaster,” adding that financial institutions “have been devastated and unable to properly serve the public.”

The White House has said Mr. Trump will eventually nominate his own choice for the next permanent director of the CFPB, who then needs to be confirmed by a simple majority in the Senate.

Financial industry experts expressed alarm at the uncertainty created by the fight.

“If there has been one consistent criticism of the CFPB, it’s a lack of predictability, and we are now left with the greatest uncertainty since the bureau was established,” said Ben Olson, a Buckley Sandler lawyer and a former CFPB official who advises financial companies.

“You now don’t know whether the people you are interacting with have the authority to sanction you, or to advise you on the proper course of conduct,” Mr. Olson said.

The competing claims on the interim leadership had lawmakers lined up in partisan camps on Sunday.

“It’s a watchdog agency, Wall Street hates it like the devil hates holy water, and they’re trying to put an end to it with Mr. Mulvaney stepping into Mr. Cordray’s spot,” said Sen. Dick Durbin (D., Ill.). “But the statute, it’s specific and it’s clear and it says the deputy shall take over.”

Sen. Lindsey Graham (R., S.C) said he thinks Mr. Trump is on “good ground here to appoint somebody under the vacancy statute.” The agency, he said, “is the most out of control, unaccountable federal agency in Washington,” and he hopes Mr. Mulvaney will “ride herd on these folks.”

The CFPB was created in response to criticism that the previous regulatory structure didn’t prevent a mortgage-market meltdown because the responsibility for consumer protection was scattered among various agencies. To allow the CFPB to work quickly, lawmakers designed the bureau to be independent, stating that its single director could only be dismissed by the president for “inefficiency, neglect of duty or malfeasance in office” and insulating its budget from congressional oversight.

CFPB moves drew praise from consumer advocates and Democrats. But Republican lawmakers and the financial industry have long criticized the CFPB as a symbol of government overreach, saying its aggressive rules and supervisory and enforcement activities have increased compliance costs and reduced credit availability for the vulnerable consumers the bureau was created to protect. The pushback has been particularly strong from industries that had previously been regulated lightly, such as payday and auto lending.

Republicans have proposed curbs to the CFPB’s power, including turning it into a commission, giving Congress control of its budget and narrowing the scope of its regulatory powers that would leave it primarily an enforcement agency.



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