Weeks into a legal and political dispute at the Consumer Financial Protection Bureau, the case of the two popes is far from being settled. There are multiple ongoing litigation efforts — with the potential to be appealed all the way up to the Supreme Court — that have already made an impact on the way the bureau is being run. President Donald Trump’s appointee to lead the CFPB, Mick Mulvaney, has rolled back, to some degree, his efforts to cripple the agency amid the legal uncertainty and heightened scrutiny of his role.
A federal court ruling last month, which denied CFPB Deputy Director Leandra English’s request to block Mulvaney from assuming the directorship, was widely seen in the media as legitimizing Trump’s appointment of Mulvaney and ending English’s challenge. But that decision pertained to a temporary restraining order, and the court has not yet ruled on the merits of the case. English’s lawyers filed a request for a preliminary injunction last week, and U.S. District Court Judge Timothy Kelly, a Trump appointee, set a December 22 hearing date for oral arguments. The ruling could come any time after that.
English was named to the role by departing Director Richard Cordray, who resigned on November 24. She continues to assert that she, the deputy director, “shall … serve as the acting Director in the absence or unavailability” of a director, under the Dodd-Frank statute that created the CFPB.
The administration believes that the Federal Vacancies Reform Act, or FVRA, provides an option for the president to appoint a Senate-confirmed official to a position, like CFPB acting director, regardless of the specific statute. The Justice Department’s Office of Legal Counsel, in an opinion written by a former counsel for a payday lender fighting the CFPB, agreed.
English’s ongoing lawsuit has been buttressed by five separate amicus briefs supporting her position. These briefs come from a collection of consumer advocacy groups, Democratic attorneys general, and consumer finance scholars, and generally mirror English’s arguments.
In one of the briefs, more than 30 current and former members of Congress, including Dodd-Frank architects Barney Frank and Christopher Dodd, wrote that they intended the deputy director to take over in the absence of the director to insulate the CFPB from politics. “In creating the Bureau, lawmakers determined that it needed to be independent in order to fulfill its mission,” the amici argued. Indeed, legislative history shows that Congress considered making the CFPB subject to the FVRA standard, but then rejected that approach, a position that the legislators who actually authored the law reinforce.
In another brief, University of Pennsylvania Wharton School assistant professor Peter Conti-Brown takes issue with the particular individual Trump appointed: Mulvaney, who is still a White House staffer (Mulvaney heads the Office of Management and Budget). “President Trump does not have the legal authority to appoint a White House official to lead the CFPB,” Conti-Brown wrote, arguing that language that the CFPB be “independent” and “within the Federal Reserve system” requires a non-White House employee leading it.
The CFPB was designed to get its funding from the Federal Reserve — which is explicitly not controlled by the White House budget director — and to have a director that can only be fired for cause. By installing Mulvaney, however, the White House is attempting to circumvent those protections to be able to dictate hiring, regulatory, and enforcement decisions at the independent agency.
Mulvaney has already begun this process. The CFPB has temporarily suspended an investigation into a bail bond company called Nexus that mainly works with unauthorized immigrants. He has halted data collection at the agency, citing “cybersecurity” fears. He named a former aide to Rep. Jeb Hensarling, R-Texas — perhaps the CFPB’s biggest opponent in Congress — to a senior advisory role. And because the CFPB director also serves on the board of the Federal Deposit Insurance Corporation and the Financial Stability Oversight Council, Trump has illegally brought a White House official into those venues as well, Conti-Brown charged.
These allegations about the legality of the Mulvaney appointment also show up in a second lawsuit, filed Tuesday by the Lower East Side People’s Federal Credit Union in a U.S. District Court in New York. The credit union asserts that Mulvaney cannot serve as acting director and that English, instead, has the legal right to do so. “An Acting Director with no lawful authority to regulate the Credit Union is now regulating the Credit Union,” the plaintiffs allege, causing what they say is direct harm to the business.
Unlike a temporary restraining order, a preliminary injunction is subject to appeal by either party. So any party to the lawsuits could challenge the rulings to a federal appellate court and even the Supreme Court, which means the legal battle is likely to continue for quite some time.
In the meantime, the legal uncertainty and the scrutiny of Mulvaney’s actions has forced him to change course on some decisions and proposals he previously made. He initially froze all payments to fraud victims. But after an outcry, he reversed himself two days later, allowing payments to be disbursed. Similarly, Mulvaney allowed some internal promotions and personnel transfers, despite a hiring freeze. He also stated that he had no plans to fire English. His proposal to embed political staffers within every part of the CFPB’s operations was met with an uproar.
And, in a twist of humor, staffers at the embattled agency have allegedly started a secret resistance group they’ve dubbed “Dumbledore’s Army,” named after a secret resistance group in the Harry Potter series.