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While the current Consumer Financial Protection Bureau head sparred with the agency’s champion, Sen. Elizabeth Warren, a legal battle over who gets to run the bureau escalated in a Washington, D.C., courtroom on Thursday.
White House Office of Management and Budget Director Mick Mulvaney is currently running the consumer bureau and testified Thursday before the Senate. Yet the deputy director of that same agency, Leandra English, is challenging his right to run the bureau before the U.S. Court of Appeals for the D.C. Circuit. English was appointed by outgoing Director Richard Cordray back in November.
It’s a legal dispute that dates to Thanksgiving and which carries implications for the future of the CFPB, the financial regulator created to protect consumers’ interests in dealings with financial products from mortgages and credit cards to payday loans.
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The Consumer Financial Protection Bureau, or CFPB, has been a total disaster as run by the previous Administrations pick. Financial Institutions have been devastated and unable to properly serve the public. We will bring it back to life!
— Donald J. Trump (@realDonaldTrump) November 25, 2017
The announcement immediately launched a succession crisis at the agency. Lawyers for both the consumer bureau and the Justice Department issued memos arguing that Mulvaney was the lawful director. English filed a lawsuit requesting an emergency order declaring her as the bureau’s lawful head. But U.S. District Judge Timothy Kelly — a Trump appointee — refused to issue such an order, writing that English failed to prove she had a chance at prevailing in the underlying lawsuit.
Mulvaney showed up at the CFPB the next Monday with a box of doughnuts and a plan to reshape the regulatory agency. He took control as the top manager and sent emails to staffers instructing them to ignore English’s claims to his position as acting director.
English still works at the agency. And aside from his instructions to ignore her communications, Mulvaney has taken no steps to remove her. But English has almost no authority, with Mulvaney making day-to-day decisions and appearing before Congress as the agency’s acting director, according to lawyers who argued the case before the appeals court on Thursday.
It’s a situation that some say contradicts the very purpose of the CFPB. Established as a part of the Dodd-Frank Act in the aftermath of the financial crisis, the CFPB was structured to be as independent and politically insulated as possible.
“One of the really important things that Congress wanted to accomplish when it created that agency was to ensure that it would be independent,” said English’s attorney Deepak Gupta, “to ensure that it had only one job: protecting the American consumer.” Gupta is himself a former CFPB employee.
But lawyers for the Trump administration say Mulvaney’s appointment was lawful under a piece of legislation called the Federal Vacancies Reform Act of 1998. That law outlines the process for appointing acting directors of federal agencies, and it was passed in response to the perceived overuse of acting director appointments under President Bill Clinton.
Under that law, the president has the authority to temporarily appoint acting directors until the Senate can confirm a permanent replacement. But the vacancies act does not apply in every situation, and it’s not the only way to name a temporary director.
“One of the things to look at is whether the more specific statute — the Dodd-Frank statute — gives enough indication expressly that the vacancies act does not apply,” University of California, Berkeley law professor Anne Joseph O’Connell said.
English’s attorneys argue that the Dodd-Frank Act overrides the vacancies act, with a specific process for filling director vacancies.
But attorneys for the Trump administration say the Dodd-Frank Act merely provides an additional option to the president — not the only option. They argue that what Trump did in appointing Mulvaney is also legal.
“Congress has already told us that if there’s an agency-specific statute,” administration lawyer Hashim Mooppan argued Thursday, “it coexists.”
The appeals court will consider the case in coming weeks. The decision could ultimately go the Supreme Court.