Since it opened its doors in 2011, the Consumer Financial Protection Bureau (CFPB) has been an unmitigated success for Americans dealing with financial companies in the aftermath of the Great Recession. In just a few short years, the CFPB has returned $12 billion to 29 million victims of financial wrongdoing—and brought back about $5 to consumers for every dollar of its funding. By tackling a range of abuses, from predatory financial practices to illegal discrimination against borrowers of color to hidden fees and gotcha offers, the bureau has ensured that struggling families, not just financial interests, have a voice in Washington. But that voice is about to change.
Yesterday, U.S. District Court Judge Timothy Kelly ruled that Mick Mulvaney, the current director of the Office of Management and Budget (OMB), could also serve as acting CFPB director per President Donald Trump’s request. This decision is at least the first step in resolving the issue of dueling directors between Mulvaney and Leandra English, the deputy director who was expected to fill the post and who filed a suit in federal court to block Mulvaney’s appointment. But it leaves serious questions about having the same person in two roles—a situation that has the potential to be both logistically complicated and politically conflicted—and threatens the agency’s future.
The Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the CFPB, intended it—like several other banking regulators—to be an independent government agency free from political interference. Toward this goal, the CFPB’s director is confirmed by the Senate for a five-year term and can only be fired for cause, not merely because of political disagreements. As a result, while leadership of many other federal departments changed hands earlier this year, CFPB leadership did not—until this week. The CFPB’s first Senate-confirmed director, former Ohio Attorney General Richard Cordray, resigned on Friday, November 24, months before his five-year term would have expired in July 2018.
This means that President Donald Trump will have the opportunity to nominate a new director, pending confirmation by the Senate. But what happens in the meantime, given that a Senate confirmation could take months? The Dodd-Frank law anticipated this scenario and explicitly stated that the deputy director would serve as acting director in the absence or unavailability of the director. Leandra English, a longtime CFPB employee and the chief of staff before being appointed deputy director last Friday, logically fills this role under the law.
The Trump administration, however, argued that she is not the legitimate acting director. Under a 1998 law, the Federal Vacancies Reform Act, the president has the authority to appoint someone who has already been confirmed by the Senate for one position to serve in an acting role for another. On Friday, President Trump announced that Mick Mulvaney would fill this role, wearing two hats at once.
Several prominent legal scholars have argued that the Trump administration does not have the authority to circumvent the CFPB’s statute. In fact, as Georgetown Law professor Adam Levitin points out, when writing Dodd-Frank, Congress initially intended for the Federal Vacancies Reform Act (FVA) to apply to the newly created CFPB but took out that language and replaced it: “Congress knew very well how to say that the FVA applies … but ultimately decided that it would not apply.”
Under a Trump-appointed acting director, the Senate is also being left out of the process for a significant duration of time. As Michigan Law professor Nina Mendelson recently wrote, allowing the president to name an acting director “perversely expand[s] the President’s flexibility to delay deliberation and a Senate confirmation vote.” Mulvaney’s appointment behind closed doors takes away the vital role of the Senate in confirming nominees and ensuring they are publicly vetted.
The two people vying for the post could not be more different. As a member of Congress from South Carolina, Mulvaney called the bureau a “sick, sad joke,” argued that it should not exist, and voted to weaken the CFPB’s authority—including votes to block the CFPB from tackling predatory payday loans and discriminatory auto lending practices, as well as a vote to allow riskier mortgage loans. He has opposed the CFPB’s recent rulemaking on payday lending and its public complaint database, which has handled more than 1.2 million consumer complaints. English is a federal official who served at the Office of Personnel Management and the Office of Management and Budget, and as part of the CFPB’s original transition team.
Despite having the title of acting director, Trump appointees have already demonstrated a willingness to break precedent. Acting Comptroller of the Currency Keith A. Noreika, who was replaced by a permanent comptroller this week, took on multiple positions that strongly depart from those of his predecessor. In seven short months, he has revoked guidance designed to stop banks from engaging in risky payday lending, opposed the CFPB’s efforts to restore victims’ access to the courts, and offered grade inflation to banks caught participating in discriminatory or illegal practices when assessed on their performance serving all communities, potentially giving a free pass to banks such as Wells Fargo, which engaged in a massive fake account scandal.
The larger question, however, is the future independence of the agency and of all financial regulators should the courts decide that Mulvaney is, in fact, acting director. The Office of Management and Budget, which reports to the president, does not normally oversee independent agencies—but if Mulvaney is serving both roles, it would be impossible to separate the two. In Levitin’s words, this “would call into question not only any actions taken by the CFPB, but also actions undertaken by the FDIC [Federal Deposit Insurance Corporation] and FSOC [Financial Stability Oversight Council], as the CFPB Director serves on those boards.” This would be a major blow to all banking regulators’ independence.
Independent banking regulators have been central to American government for decades because Congress and the president both recognized that a financial system subject to partisan meddling would be risky for everyone. When Congress created the Consumer Financial Protection Bureau, it similarly aimed for independence so that special interests could not hold the agency captive. By placing an acting director at the CFPB for an unknown length of time—instead of nominating a new director subject to Senate confirmation while English fills the acting role—the Trump administration threatens both the law as Congress intended and the future of Americans’ ability to be protected from financial scams that pick their pockets and wreak havoc on the broader economy.
Joe Valenti is the director of Consumer Finance at the Center for American Progress.
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Director, Consumer Finance