Trump appointee can stay in charge of CFPB, for now

Court offers no ruling in battle over control of consumer protection agency

Fred O. Williams
Senior Reporter
Expert on consumer credit laws and regulations.

alt text

President Donald Trump’s appointment of John M. “Mick” Mulvaney to head the Consumer Financial Protection Bureau violates the law that created the bureau and is likely to undo its goal of consumer protection, opponents argued Friday in U.S. District Court.

The appointment of a White House official to head an independent agency “is a threat to the basic norms of independence that govern the way we regulate finance in this country,” said Deepak Gupta, attorney for the CFPB deputy director who is challenging Mulvaney's appointment.

Mulvany will, however, remain in charge of the consumer protection agency for now, as U.S. District Judge Timothy J. Kelly offered no ruling on the case. Kelly gave no indication of how or when he will rule.

Mick Mulvaney

Mick Mulvaney

Judge Kelly heard arguments to oust Mulvaney, who is head of the White House’s Office of Management and Budget, in favor of Leandra English, a longtime employee of the agency and its deputy director. Kelly turned down English’s request for a temporary restraining order Nov. 28.

Both claim to be the legitimate acting director of the consumer protection bureau under two different laws. English cites the Dodd-Frank Act that created the agency, which says the deputy director steps in to the acting director’s role “in the absence or unavailability of the director.”

On the other side, Justice Department lawyers argued that the Federal Vacancies Reform Act gives the president authority to fill vacancies in the executive branch.

 alt=

Leandra English

The succession language in the Dodd-Frank act “does not clearly apply to resignations and vacancies,” the administration argued in its response to English’s court filing.

"They're asking the court to install the third director (of the agency) in less than a month," Justice Department acting assistant attorney general Chad Readler told the court.

Consumer protection at stake

What’s at stake is the continuation of the bureau’s job fighting anti-consumer practices at banks, payday lenders, credit bureaus, debt collectors and other companies in the financial services industry.

As a congressman, Mulvaney was a member of the staunchly anti-regulation House Freedom Caucus, and co-sponsored legislation to eliminate the CFPB in 2015.

“We believe the record is that (Mulvaney’s) appointment is not in the best interest of consumers,” said Stuart Rossman, director of litigation at the National Consumer Law Center. “To the contrary, he’s indicated a great deal of animosity to the organization and its mission.”

After his appointment Nov. 27, Mulvaney announced a freeze on hiring and agency activities including enforcement actions against companies.

What’s at stake is the continuation of the bureau’s job fighting anti-consumer practices at banks, payday lenders, credit bureaus, debt collectors and other companies in the financial services industry.

CFPB actions already affected by change in leadership

  • Among the investigations by the consumer protection agency delayed by Mulvaney's arrival is one involving Synchrony Financial, the giant credit card issuer. In May 2017, the CFPB launched an investigation of Synchrony’s marketing and servicing of “deferred interest” credit cards – usually store cards that promise zero interest for a number of months, but can result in hefty charges for built-up interest.

  • The CFPB softened its stance in one case, dropping a demand for an $8 million bond from a mortgage company accused of misleading customers. 

  • The consumer watchdog dropped plans to poll consumers online about their experience with debt collectors as part of a debt collection rulemaking. 

  • The agency removed the name of a pioneering consumer protection jurist, Louis Brandeis, from its fellowship program for law students.

“Another area where there could be a big change is the consumer complaint database,” said Melissa Stegman, senior policy counsel at the Center for Responsible Lending. 

Nearly 1 million complaints processed by the agency are published on its website – minus people’s names and identifying information – as a resource for consumers and researchers on corporate practices.

The Dodd-Frank Act mandates the bureau’s complaint-taking role, but does not prevent the published data from being taken down, Stegman said. Banking groups have aimed criticism at the public database.

"We believe the record is that (Mulvaney’s) appointment is not in the best interest of consumers. To the contrary, he’s indicated a great deal of animosity to the organization and its mission."

How judge will decide

English, with the support of consumer advocacy groups and Democratic lawmakers – including former Sen. Christopher Dodd and U.S. Rep. Barney Frank (authors of the Dodd-Frank Act) – is seeking an injunction that would put her in charge of the agency while the case continues.

There are four factors in granting an injunction: the likelihood of success of the lawsuit, whether English will suffer “irreparable harm” without the injunction; the balance of the hardships faced by both sides, and the effect on the public interest.

Consumer organizations are arguing that the public interest is on the side of putting English in charge of the bureau. Mulvaney’s appointment violates the consumer bureau’s independence – a bedrock principle of its creation in the wake of the 2008 financial crisis, they say.

Mulvaney “has an inherent conflict of interest with the agency’s statutory mission as long as he serves in his White House leadership position,” the consumer groups argued in their filing. “Further he is using his purported appointment at the CFPB to slow or halt execution of the CFPB’s core functions and to tie the independent agency to the current administration’s priorities.”

The U.S. Chamber of Commerce, the Credit Union National Association and a group of 13 Republican attorneys general filed amicus briefs supporting the White House’s authority to appoint Mulvaney. Limiting the White House’s authority to appoint agency heads conflicts with its constitutional powers, they argue.  

The U.S. Chamber of Commerce, the Credit Union National Association and a group of 13 Republican attorneys general filed amicus briefs supporting the White House’s authority to appoint Mulvaney.

Judge Kelly pressed Gupta, saying that if English takes charge, she could serve indefinitely as head of a powerful U.S. agency, against the wishes of the president. Such a scenario could raise constitutional questions about limitations to the president's power.

Gupta countered that Mulvaney's appointment represented an end-run around the Senate's power to confirm presidential nominees, and is especially questionable in view of the CFPB's independence. "If there is one thing that's clear in Dodd-Frank, it's that Congress intended this agency to be independent," Gupta said.

A tweet from the President Trump on Dec. 8 concerning the bureau's earlier $100 million fine against Wells Fargo shows that fears of White House interference in the law enforcement actions of the independent regulatory agency are not hypothetical, Gupta said.

What happens next

Judge Kelly’s decision will almost certainly be appealed whether he grants or denies the injunction, legal experts said. The appeal would go to the U.S. Circuit Court of Appeals for the District of Columbia Circuit, and possibly beyond that, to the U.S. Supreme Court. Even if Kelly grants the injunction, he could allow Mulvaney to remain in charge of the agency during an appeal.

Gupta said he thinks Kelly understands the importance of a speedy ruling. However, every day that Mulvaney remains in charge of the bureau represents a loss for English and the bureau's independence, Gupta said.

"You cannot unscramble the egg of having the wrong person running the Consumer Financial Protection Bureau," he told the court.

FAQ: Mick Mulvaney’s appointment and the future of CFPB

Q. How did the fight for control of the CFPB begin?
The former director, Obama-appointee Richard Cordray, resigned Nov. 24, after appointing chief of staff Leandra English as the bureau’s deputy director. With the director’s job vacant, President Trump named his director of White House Office of Management and Budget (OMB), John M. “Mick” Mulvaney, as acting director of the CFPB. The appointment was made under a law giving the president authority to appoint someone who has already been confirmed by the Senate to lead another agency. English argues that the Dodd-Frank Act mandates that she, as deputy director, should have become the acting director.

Q. Won’t the president appoint the agency’s permanent director anyway?
A. Yes, the director’s term that Cordray left ends in July. However, a permanent director will face hearings in the Senate and a confirmation vote, subjecting the nominee to scrutiny of their background in consumer protection. Mulvaney’s narrow confirmation as head of OMB in February 2017 did not anticipate his leading a consumer protection agency.

Q. What does the fight mean for the consumer protection bureau?
A. At question is the White House’s authority over executive agencies versus Congress’ intent to set up the consumer bureau as an independent agency, insulated from political pressures. Once appointed and confirmed by the Senate, the permanent director has a five-year term, and can only be removed for cause. Mulvaney, however, serves in the White House and answers to the president.

See related: Trump appointee promises 'dramatically different' CFPB, How to file a complaint about a credit card issuer,


Join the discussion
We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.




Weekly newsletter
Get the latest news, advice, articles and tips delivered to your inbox. It's FREE.


Updated: 08-14-2018