Research and Statistics

Judge lets Trump appointee remain as CFPB head

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

Judge rules cfpb acting director

President Trump’s deregulation-minded appointee John M. “Mick” Mulvaney can remain as the acting head of the U.S. Consumer Financial Protection Bureau, a federal judge ruled Wednesday.

The ruling by U.S. District Court Judge Timothy J. Kelly denies CFPB Deputy Director Leandra English’s petition for an injunction. She claimed to be the lawful successor to bureau director Richard Cordray, who left the post in November.

Deepak Gupta, English’s lawyer, disagreed with the decision without indicating whether English will appeal or continue her court challenge.

“Mr. Mulvaney’s appointment undermines the bureau’s independence and threatens its mission to protect American consumers,” Gupta’s statement said.

Mick Mulvaney

Mick Mulvaney

The denial of English’s claim leaves Mulvaney in charge of the agency that he sought to eliminate as a South Carolina congressman. Mulvaney, who now works for the president as director of the White House Office of Management and Budget, has promised a “dramatically different” stance at the CFPB.

Judge says Dodd-Frank Act doesn’t prohibit Mulvaney’s appointment

In his ruling, Kelly said the policies of the acting director are not relevant to the court’s decision, which is based on legal analysis of the president’s appointment powers.

While the Dodd-Frank Act that created the bureau does call for its independence, it does not prohibit Mulvaney’s appointment, Kelly ruled. Federal law gives the president wide latitude to select agency heads during an interim period before the Senate can confirm a permanent replacement, he said.

Moreover, switching the agency’s chief would not be in the public interest. “Granting English an injunction would not bring about more clarity; it would only serve to muddy the waters,” Kelly said.

Leandra English

Leandra English

Mulvaney was named acting director of the bureau by the White House on Nov. 24 2017, the day Cordray departed, setting up the court battle. English argued that the Dodd-Frank Act calls for the deputy director to become acting director in the director’s absence. Wednesday’s ruling follows a December 2017 hearing on English’s lawsuit and request for a restraining order, which Kelly denied.

Why the decision matters to consumers

At stake for consumers is how aggressive the 7-year-old agency will be in cracking down on harmful practices in the financial industry.

Under Obama-appointee Cordray, the agency obtained $12 billion in refunds and debt forgiveness for consumers, including $2.5 billion for nearly 21 million users of faulty credit card add-on products.

Mulvaney, who co-sponsored legislation to eliminate the bureau as a South Carolina congressman in 2015, has promised a “dramatically different” stance at the CFPB.

Under the free market-oriented OMB director, the bureau added a phrase in its self-description emphasizing its role to address “outdated, unnecessary or unduly burdensome regulations,” de-emphasizing its focus on consumer protection. Since he arrived, the bureau has delayed implementation of a regulation governing prepaid cards that was set to take effect in April 2018. The CFPB also halted a planned survey to gather data for a regulation on debt collectors.

While the White House has authority to appoint a permanent director at the CFPB, that appointment must be approved by the Senate. In addition, the permanent director is protected from dismissal except for cause, giving the bureau greater independence.

English argued that Mulvaney’s position in the White House, answering to the president, contradicted Congress’s intention in the Dodd-Frank Act to insulate the bureau from political pressures. 

Dodd-Frank authors Christopher Dodd and Barney Frank agreed in a supporting brief they filed with the court. But Kelly said that Congress’s legislative intent was not clearly expressed to override presidential appointment powers under the Federal Vacancies Reform Act.  

See related: What a federal consumer watchdog can do

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