“The President’s purported or intended appointment of defendant Mulvaney as Acting Director of the CFPB is unlawful,” the lawsuit says.
Richard Cordray resigned as CFPB director Friday and designated his chief of staff, English, as his temporary replacement, sparking a legal showdown with the White House over who will run the agency. A few hours after Cordray announced that English would serve as acting director, Trump named Mulvaney, the Office of Management and Budget director and a longtime critic of the CFPB, to the job.
“The talented and hard-working CFPB staff stand up for consumers every day. As Acting Director, I am filing this lawsuit to stand up for the CFPB,” English said in a statement.
White House press secretary Sarah Huckabee Sanders said in a statement that the White House was aware of the lawsuit, but that the law is clear and that Mulvaney is the CFPB’s acting director. “It is unfortunate that Mr. Cordray decided to put his political ambition above the interests of consumers with this stunt,” Sanders said. “Director Mulvaney will bring a more serious and professional approach to running the CFPB.” (Cordray is widely expected to run for governor of Ohio.)
To bolster the administration’s position, the White House also shared a letter that Mary E. McLeod, CFPB’s general counsel, sent to the senior leadership of the agency on Saturday, arguing that Trump has the authority to name the acting director. “I advise all Bureau personnel to act consistently with the understanding that Director Mulvaney is the Acting Director of the CFPB,” McLeod said in the letter.
The White House has said it expects both Mulvaney and English to show up to work Monday morning. Mulvaney would be the acting director, while English would be his deputy, administration officials insist.
There is a lot at stake for the CFPB, which now has 1,600 employees and has long been a target of Republican critics who say the agency needs to be reined in. Mulvaney has called the agency a “joke” and advocated for it to be dissolved. In a tweet Saturday, Trump called the CFPB “a total disaster” and said “We will bring it back to life.”
The fight for control of the agency has often fallen along partisan lines. On CNN’s “State of the Union” Sunday, Sen. Richard J. Durbin (D-Ill.) said he believed English was rightly in control of the CFPB. “Remember, this was the agency that fined Wells Fargo $100 million for defrauding the people who were creating phony accounts,” he said. “It’s a watchdog agency. Wall Street hates it like the devil hates holy water.”
Meanwhile, Sen. Lindsey O. Graham (R-S.C.) backed the appointment of Mulvaney. The CFPB is out of control, he said. “They can get into everybody’s business. I don’t think they added much at all to the consumer protection. They sure add a lot to increasing costs for midsize banks throughout the country that had nothing to do with the financial collapse.”
Democrats and consumer groups, which have trumpeted the agency’s track record for going after big banks, say they are resigned to a Trump administration takeover of the agency eventually but want English to serve as acting director until Trump nominates a permanent replacement who can be confirmed by the Senate. Even that temporary delay would offer the agency some stability before it undergoes what many fear could be a potentially radical restructuring, they say.
“The only thing that will turn the @CFPB into a disaster is for @realDonaldTrump to ignore Dodd-Frank & name an acting director determined to destroy the agency,” tweeted Sen. Elizabeth Warren (D-Mass.), who, as a bankruptcy professor at Harvard Law School, came up with the idea for the agency.
Whoever takes the reins of the agency Monday morning, their decisions are likely to become subject to a legal challenge. Even mundane actions by the CFPB could be thrown out should their case prevail, legal experts say.
“On the regulatory side, any further rule making will just stop for the time being. Nobody can do anything until everybody knows who is the legitimate director,” said Alan Kaplinsky, head of the Consumer Financial Services Group for law firm Ballard Spahr. “It’s an untenable situation and one that begs for a court determination and a quick one.”
The dispute is putting English, a typically behind-the-scenes longtime government executive, at the forefront of what is likely to be a long battle.
English has served in various positions within the CFPB, the Office of Personnel Management and the Office of Management and Budget. According to several people who know her, English, who attended New York University and the London School of Economics, has typically gravitated toward operational positions rather than policy jobs and has been able to rise through the ranks because of her steady leadership skills.
She was part of a small team at the Treasury Department that helped launch the CFPB, including establishing early relationships with small banks. “It felt like we were engaging in retail politics a little bit,” she said in a 2014 Washington Post interview. “Time after time, we would go into a room, especially with community bankers, and you could just feel instantly that they were very skeptical, nervous, not expecting us to be friendly. And by the time we walked out, the tone had completely changed.”
English eventually rose to be the agency’s chief of staff. Cordray promoted her to deputy director on Friday and said she would temporarily take his place. “Leandra is a seasoned professional who has spent her career of public service focused on promoting smooth and efficient operations. 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 announcing he was promoting her to deputy director.
Supporters of English’s claim to the acting director position point to language in the 2010 legislation, known as Dodd Frank, that created the bureau. The legislation said the CFPB’s deputy director would take over in the absence of its director, they note. Cordray noted that statute when resigning and designating English as acting director.
“Instructions under the Dodd-Frank and Wall Street Reform and Consumer Protection Act are plain and simple — if the CFPB Director steps down, the Deputy Director assumes the role of Acting Director until the President nominates, and the Senate confirms, a permanent Director,” said Mike Calhoun, president of the Center for Responsible Lending.
“This unlawful, backdoor approach of appointing Mick Mulvaney as leader of the Bureau circumvents regular order.”
But the White House argues that while Cordray’s appointment of English may be legal, the president’s authority under the Federal Vacancies Reform Act allows him to install Mulvaney instead. The Justice Department’s Office of Legal Counsel issued an eight-page opinion late Saturday supporting Mulvaney’s appointment as temporary head of the agency.
Trump is likely to nominate a permanent CFPB director in the next few weeks, administration officials said.