President Trump and the outgoing head of the Consumer Financial Protection Bureau both named acting directors to head the watchdog agency on Friday, throwing its leadership into disarray.
Legal analysts were split over whether the White House or the CFPB had authority to name an acting director, with each side citing the fine print of dueling federal rules. Some said the laws were open to interpretation and the courts ultimately would have to decide the matter.
Trump proposed his White House budget director, Mick Mulvaney, as the acting director of the CFPB, which Mulvaney once called a “joke” and said he wished didn’t exist. Several defenders of the agency said they were worried that Mulvaney, if given the helm of the CFPB on a temporary basis, would gut its powers.
The series of events began Friday when the CFPB’s longtime director, Richard Cordray, announced that he would leave at the end of the day — instead of the end of the month — and promoted his chief of staff, Leandra English, to become deputy director. Cordray said in a letter to CFPB staff that English would serve as the agency’s acting director until a replacement was confirmed by the Senate.
“I have also come to recognize that appointing the current chief of staff to the deputy director position would minimize operational disruption and provide for a smooth transition given her operational expertise,” Cordray said in his letter. The move was widely seen by analysts as an attempt to block Trump from immediately putting a Republican in charge of the agency without Senate confirmation.
But a few hours later, the White House announced that Mulvaney, the director of the Office of Management and Budget, would take over.
“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,” a White House statement said.
Mulvaney is also expected to remain head of the OMB until a permanent CFPB director is nominated and confirmed by the Senate, according to the White House.
The Dodd-Frank financial law, passed in 2010, states that a deputy director will “serve as acting director in the absence or unavailability of the director.”
But legal experts said that the word “unavailability” could be open to various interpretations. For instance, that phrase could be interpreted to be about the director’s health, rather than the director’s retirement.
“The courts will likely have to resolve which interpretation is accurate,” said Mike Calhoun, president of the Center for Responsible Lending.
Others said the Federal Vacancies Reform Act gives the President wide latitude to appoint an acting director.
“President Trump is the only person allowed to name the new head of the Consumer Financial Protection Bureau (CFPB). Any attempt to circumvent that authority by Cordray runs counter to the fundamental principles of American governance,” said Rick Manning, president of the Americans for Limited Government.
Regardless, Cordray’s resignation gives Republicans an opportunity to remake an agency they have long complained is too powerful, whether under a temporary or permanent director.
“As in my role at OMB, the priority during this transition is to put the American people first,” Mulvaney said in a statement. “I believe Americans deserve a CFPB that seeks to protect them while ensuring free and fair markets for all consumers.”
Mulvaney has been one of the agency’s toughest critics. When he was a Republican congressman in 2015, he co-sponsored legislation to get rid of the agency and said at a House hearing: “I don’t like the fact that CFPB exists, I will be perfectly honest with you.”
In a 2014 video interview with the Credit Union Times, Mulvaney complained that it could be difficult even to have the CFPB return a phone call. “It has been a truly adversarial relationship. The CFPB, by virtue of the fact that they don’t need Congress to exist,” is difficult to hold accountable, he said. “The place is a wonderful example of how a bureaucracy will function if it has no accountability to anybody.”
The agency is a “joke . . . in a sick, sad way,” he said.
But supporters of the CFPB say it is one of the central achievements of the Obama administration after the 2008 financial crisis. Created under the 2010 financial regulation bill known as Dodd-Frank, it regulates the way banks and other financial companies interact with consumers, policing payday loans and mortgages, among other things. The CFPB has extracted billions in fines from big banks, including $100 million from Wells Fargo last year for opening millions of sham accounts that customers didn’t ask for.
“In its short years as the nation’s top consumer cop, all under Director Cordray, the young Bureau has returned $12 billion dollars to over 29 million consumer victims of financial schemes by wrongdoers ranging from Wall Street banks, mortgage companies and for-profit schools to debt collectors, credit bureaus and payday lenders,” said Ed Mierzwinski, director of the consumer program at U.S. Public Interest Research Group.