The Consumer Financial Protection Bureau was set up after the financial crisis, when it became clear that part of the unraveling subprime mortgage bubble were exploitive contracts that led borrowers into loans they could never repay. But the CFPB’s advocacy for customers has led banks to fight the agency tooth and nail since its inception.
Who will lead the only US financial regulator focused on protecting regular people? That’s a problem that will need to be solved by the courts, thanks to a legal mess created by president Donald Trump.
The agency’s first director, Richard Cordray, stepped down on Nov. 24, almost eight months ahead of his term’s expiration. Beforehand, he elevated his chief of staff, Leandra English, to the position of deputy director; this made her the acting director upon Cordray’s departure. Later same day, Trump tapped Mick Mulvaney, his director of the Office of Management and Budget, to be the acting director.
This set up competing authorities at the agency, and English has filed a suit asking for courts to confirm her as the true director and grant a restraining order to prevent Mulvaney from taking office.
This is no small distinction: English, a career civil servant, appears ready to execute the mission of the CFPB, whose enforcement actions have returned $12 billion to 29 million Americans. Mulvaney, while in congress, voted to eliminate the agency. Like Trump, he has argued that if banks were able to save money on the cost of complying with rules (and presumably, profit from things like opening accounts that people didn’t authorize) they will reward consumers in the form of cheaper loans. Effectively, the question of who runs the agency is the question of whether it will function at all.
As English notes in her lawsuit,
Mr. Mulvaney has never previously served in any capacity in a consumer-protection enforcement or financial or banking regulatory agency at the state, federal, or local level. Mr. Mulvaney has described the CFPB as a “sad, sick joke,” has co-sponsored legislation proposing to eliminate the agency, and has said at a hearing in the House of Representatives: “I don’t like the fact that CFPB exists, I’ll be perfectly honest with you.”
The White House’s case is backed by a memo (pdf) from the Department of Justice’s Office of Legal Counsel, perhaps most famous for authorizing torture under the Bush administration. In this case, the OLC argues that a law called the Federal Vacancies Reform Act (FVRA) allows the president to appoint a new acting director to positions that require senate confirmation.
However, this law was written before the CFPB was created. Georgetown law professor Adam Levitin argues that this is a key distinction, since the legislative record of the FVRA says that future laws that offer an alternative mode of succession won’t be covered by its procedures. The law that created the CFPB does outline its own plan for succession, with the deputy director stepping in as acting director; one of the law’s authors, former representative Barney Frank, said it was specifically designed so the president could not appoint an acting director without senate confirmation.
Thanks to English’s suit, the courts will pick which succession law takes precedence. Meanwhile, Mulvaney says he will show up the CFPB on Monday to take charge. That raises the other issue with Trump picking Mulvaney: He would be at once a White House adviser serving at the pleasure of the president, and the head of an ostensibly independent agency. Aside from the human capacity required to manage two important organizations, it’s an apparent conflict of interest.