The Consumer Financial Protection Bureau (CFPB) is the federal agency that’s supposed to protect consumers in the financial sector. It was created by the Dodd-Frank Act.
The CFPB’s director heads the agency free from presidential supervision. Given the CFPB’s broad authority over the U.S. economy, the director “enjoys significantly more unilateral power than any single member of any other independent agency.” So said the U.S. Court of Appeals for the District of Columbia in declaring the leadership structure of the CFPB unconstitutional.
This decision is under review by the full D.C. Circuit, a body dominated by liberal Democrats. The matter may be headed to the Supreme Court.
In the meantime, we are in the midst of a struggle over who will be the CFPB director. Richard Cordray, a left-wing Ohio politician, has been the director. He was appointed when it became clear that Elizabeth Warren, whose brainchild the CFPB is, could not be confirmed to lead it.
On Friday, Cordray announced his resignation effective immediately, and appointed Leandra English, his chief of staff, to be the deputy director of the CFPB. He did so in order to prevent President Trump from reining in the agency.
Shannen Coffin explains the move:
Trump has express constitutional authority to appoint Cordray’s replacement and, in time, will do so. But like much that happens in Washington, installing a new director of the CFPB will take time. The appointment is subject to the advice and consent of the Senate, and Senate Democrats will throw as much sand in the gears of the confirmation process as a minority party can muster. The directorship could remain vacant for months, or longer.
By slow-walking the confirmation process and, at the same time, blocking the president’s appointment of an interim director, Democrats could for, the foreseeable future, extend Cordray’s regulatory mischief and forestall efforts to roll back the CFPB’s regulatory programs.
Mick Mulvaney, who currently heads the Office of Management and Budget, is Trump’s choice to direct the the CFPB. Mulvaney has called the CFPB a “sick, sad joke,” and a “wonderful example of how a bureaucracy will function if it has no accountability to anyone.” As acting director, Mulvaney could begin the process of unwinding the CFPB’s regulatory overreach.
Recently, that overreach has been particularly pronounced. According to Coffin:
In the months leading up to his resignation, Cordray accelerated the CFPB’s work and its regulatory overreach. He rolled out new regulations prohibiting mandatory arbitration in financial services agreements—they were subsequently overturned by Congress under the Congressional Review Act. Cordray finalized a far-reaching rule—the breadth of which is evidenced by more than 1,700 pages of official commentary—that seeks to police out of existence much of the payday and title-loan industry without providing alternative credit avenues to the millions of cash-strapped consumers who use these lenders of last resort.
The CFPB also stepped up its enforcement efforts against financial-services businesses aimed at the individual consumer, invoking a muscular and seemingly boundless statutory view of its authority to curb “unfair, deceptive and abusive” practices. This trend would likely continue under Cordray’s hand-picked successor.
President Trump responded to Cordray’s power play, or resistance as Sen. Tom Cotton describes it, by designating Mulvaney as acting director of the CFPB. Trump invoked his power under the Vacancies Reform Act of 1988. It permits the president to designate any Senate-confirmed federal official (and certain other federal officers and employees) to perform the functions and duties of a vacant federal office (with some limited exceptions) in an acting capacity for a statutorily-limited time period.
The General Counsel of the CFPB issued a memorandum concurring in the President’s action. However, English filed a lawsuit to force Mulvaney out and keep control over the agency.
The basis of English’s suit is that the Dodd-Frank Act provides that the director has the authority to appoint a deputy director who “shall . . . serve as acting Director in the absence or unavailability of the Director.” English argues that this provision controls because the Vacancies Reform Act provides that its methods of temporarily filling a vacant office are meant to be exclusive, unless some other statutory provision explicitly permits another mode of designation or “designates an officer or employee to perform the functions and duties of a specified office temporarily in an acting capacity.” She contends that the Dodd-Frank Act is such a separate statute, and it designates the deputy director to perform the functions and duties of the vacant director position in an acting capacity to the exclusion of the president’s authority.
Coffin rejects English’s argument. He points out that the Vacancies Reform Act does not say the president’s authority is overridden where a separate statute, such as Dodd-Frank, provides for other modes of designating an acting official. It merely says that the president’s power is not exclusive in those circumstances — in other words, the president can decide to appoint someone or to allow go along with the designee selected pursuant to another statute.
That’s been the position of the Justice Department’s Office of Legal Counsel. In addition, the liberal Ninth Circuit Court of Appeals, in a case involving the National Labor Relations Board Office of General Counsel, concluded that the president may elect which avenue to choose where another statute also authorizes a method of temporarily filling a vacancy.
In addition, Coffin argues that the Dodd-Frank Act doesn’t really address vacancies in the office of CFPB director at all. It speaks of situations in which the director is absent or unavailable, not cases in which there is no director.
By contrast, the OMB statute applies “when the office of Director is vacant.” Other statutes similarly speak of vacancies in office. Thus, Congress knows how to authorize an official to act in the event of a vacancy. It did not do so in Dodd-Frank.
In any event, courts now have two issues to sort out: (1) is the structure of the CFPB constitutional and (2) who is the agency’s acting director.
What should happen in the meantime? I call on Sen. Tom Cotton:
The Consumer Financial Protection Bureau is a rogue, unconstitutional agency. Leandra English’s lawsuit to install herself as acting director against the president’s explicit direction is just the latest lawless action by the CFPB. She doesn’t have a legal leg to stand on, as her own general counsel has conceded and the Department of Justice has concluded.
The president should fire her immediately and anyone who disobeys Director Mulvaney’s orders should also be fired summarily. The Constitution and the law must prevail against the supposed resistance.