CFPB Leadership Dispute: Impacts and Next Steps

A dramatic legal fight over interim leadership of the Consumer Financial Protection Bureau (CFPB or Bureau) saw its first round end November 28, 2017, when a federal judge denied a motion for a temporary restraining order (TRO) requested by the CFPB's recently appointed Deputy Director, Leandra English. In her motion, English relied on Section 1011 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) to assert that, as Deputy Director, she—and not President Trump's interim appointee for the position, Mick Mulvaney—is the Bureau's Acting Director. The US government opposed English's motion, asserting that Mulvaney was duly appointed under the Federal Vacancies Reform Act of 1998 (Vacancies Act). English's motion is part of a larger suit in which she seeks injunctive and declaratory relief against the President and Mulvaney. Although the dispute has generally been characterized as a political power struggle, it also has potentially significant policy implications, especially for those institutions with matters pending currently before the Bureau.

Since Friday, November 24, 2017, both English and Mulvaney have purported to be the CFPB's Acting Director. The CFPB's website currently identifies Mulvaney as Acting Director, and he is now working from the CFPB Director's office and has announced a slate of changes to the agency's agenda. Meanwhile, English has e-mailed CFPB staff and met with Democratic Senators on Capitol Hill to bolster her position. Notably, the CFPB is not a plaintiff in the case.¹ Rather, English, in her personal capacity, is the sole plaintiff. She is expected to continue to challenge Mulvaney's claim to the Acting Directorship and could do so in a few ways, all with a view towards appeal to the DC Circuit Court of Appeals (DC Circuit), including:

• Continuing to press the complaint, and then appeal. The next phase would entail the Administration filing motions to dismiss for a number of possible reasons, including lack of jurisdiction and failure to state a claim.² English's counsel has indicated that she would attempt to appeal these, which would allow de novo review by the DC Circuit.
• Seeking interlocutory appeal of the TRO or a preliminary injunction. Appellate courts rarely permit appeals of TROs, and only do so in extraordinary circumstances. English has not yet moved for a preliminary injunction, a decision on which would be more readily appealable. And the judge has stated that, if she does so, he would expect more thorough briefings and further hearings on all the issues concerning such a motion, including Constitutional issues raised in enjoining the President of the United States. On appeal, both would be reviewed for abuse of discretion.

Notwithstanding the potential, short-term impact of this dispute, the case will become largely irrelevant when President Trump appoints, and the Senate confirms, a new, permanent CFPB Director. Assuming Mulvaney remains in place as the Acting Director, which seems likely, a newly appointed and confirmed CFPB Director could ratify Mulvaney's actions as Acting Director, even if Mulvaney's interim appointment is determined to be unlawful.

Perhaps the most significant impact of this dispute is that it appears to have renewed and energized discussion in Congress about CFPB reform, including replacing the single director structure with a bipartisan commission. This alert discusses the history and likely next steps in the English case, as well as its key policy and practical implications.

The Acting Director controversy has emerged against a backdrop of increasing uncertainty concerning the CFPB's policy agenda, its role as a regulator and supervisor, as well as its single director structure, which, perhaps ironically, was championed by its supporters as a way to minimize political pressures and avoid politicizing the agency's mission. No matter the outcome of English v. Trump, President Trump will ultimately appoint a permanent Director who is expected to significantly depart from the former CFPB Director Richard Cordray's approach and agenda. This, of course, highlights the impact on, and potential vulnerability to agency stability of a structure that appears to eschew debate and deliberation among various policy viewpoints in favor of directed action.

On November 15, 2017, former CFPB Director Richard Cordray announced that he would resign by the end of the month.³ On November 24, Cordray announced that instead he would resign at the end of the day and was naming English, his chief of staff,⁴ as his Deputy Director so that she could succeed him as Acting Director under Section 1011 of the Dodd-Frank Act.⁵ Later that day, President Trump announced that he was appointing Mulvaney to serve as the CFPB Acting Director pursuant to the Vacancies Act.⁶

The Administration's position

In support of Mulvaney's appointment, the Administration relies on established...