CFPB’s controversial structure looms over leadership showdown

Office of Management and Budget (OMB) Director Mick Mulvaney speaks to the media at the U.S. Consumer Financial Protection Bureau (CFPB), where he began work earlier in the day after being named acting director by U.S. President Donald Trump in Washington November 27, 2017. A day earlier, Mulvaney was sued by Leandra English, a senior CFPB official who claims that she is the agency’s rightful leader after Richard Cordray, the former director, pushed English to the top of the agency late last week in a final move before he stepped aside. REUTERS/Joshua Roberts

When Congress authorized the Consumer Financial Protection Bureau’s establishment in 2010’s Dodd-Frank Financial Reform Act, lawmakers were determined to ensure the agency’s independence from the executive branch. The law called for a single director, rather than a commission, to lead the bureau, which was to be placed within the already-independent Federal Reserve system in order to protect its funding.

Yes, Dodd-Frank directed that the CFPB’s lone director be nominated by the president (and approved by the Senate). But the law also said that once the director was confirmed to a five-year term, he or she could not be removed by the president except for good cause.

That structure, designed to insulate the CFPB’s power, has now provided the Trump administration with a justification for the president’s authority to appoint an interim director.

As the CFPB’s old guard engages in a fiery dispute with the Trump administration over control of the bureau, proponents of the agency may come to regret investing the CFPB’s power in a single director.

The CFPB’s unusual structure has already caused controversy. In 2016, a three-judge panel of the District of Columbia U.S. Circuit Court of Appeals ruled the bureau is unconstitutional under separation-of-powers doctrine because its director is not accountable to anyone — not fellow commissioners, not Congress and not the president.

That decision is under review by the entire D.C. Circuit, which heard arguments last May on the constitutionality of the bureau’s structure.

It’s entirely plausible that the appeals court will end up deciding the CFPB’s structure is constitutional, since several judges suggested at oral arguments that the CFPB’s director is no less accountable than commissions of other independent, executive-branch agencies such as the Federal Trade Commission or the Securities and Exchange Commission.

In the meantime, though, the CFPB’s structure has become an issue in the bitter fight over the agency’s leadership.

As you know, Director Richard Cordray officially stepped down as of Nov. 24. In his resignation, Cordray designated CFPB official Leandra English as his successor, citing statutory language in Dodd-Frank that calls for the bureau’s deputy director to take over in the “absence or unavailability” of the director.

The White House refused to accept English’s appointment. Instead, President Donald Trump named an avowed CFPB skeptic, Mick Mulvaney of the Office of Management and Budget, as acting director. The Justice Department’s Office of Legal Counsel released a Nov. 25 opinion explaining why it believes the Federal Vacancies Reform Act empowered the president to name an acting CFPB director.

English immediately went to court to challenge Mulvaney’s appointment. On Sunday night, her lawyers at Gupta Wessler sued Trump and Mulvaney in federal court in Washington, D.C., seeking a declaration that English is the CFPB’s acting director. English also moved for a temporary restraining order barring Mulvaney from taking the office.

In a bizarre showdown on Monday, both English and Mulvaney claimed the job. As Reuters reported, English welcomed CFPB staffers back from the Thanksgiving holiday in an email she signed as acting director. Mulvaney, meanwhile, brought in a sack of doughnuts and sent around his own email directing employees to disregard any instructions they might receive from English.


The intersection of the Federal Vacancies Reform Act and Dodd-Frank’s CFPB provisions defies easy answers.

Eminent law professors spent the latter half of Thanksgiving break debating which law prevails — without reaching any consensus. The CFPB’s own general counsel, Mary McLeod, contributed to the confusion in a memo siding with the Trump Justice Department and against her old boss, Cordray.

English’s lawyers rely heavily on Dodd-Frank’s statutory language specifying a CFPB succession plan. When the bill first passed the House of Representatives in 2009, Gupta Wessler said in a brief backing English’s TRO motion, it called for the director to be replaced via the Federal Vacancies Reform Act if he or she became unavailable. The Senate, however, changed the plan.

Its version of the CFPB succession — which ended up being enacted — called for the CFPB’s deputy director to step into the post if there’s a temporary vacancy.

“This change — from using the FVRA to providing a different mechanism — reflects a considered decision that the FVRA should not govern succession in the event of a vacancy in the director position,” English’s memo said.

If there is conflict between Dodd-Frank’s CFPB provisions and the Federal Vacancies Reform Act, English’s lawyers said, then Dodd-Frank prevails as a matter of statutory construction.

Dodd-Frank is both more recent and more specific than the FVRA, so, according to English, it is the controlling statute. Holding otherwise, and allowing the president to appoint an at-will White House employee to head the CFPB, “would violate Dodd-Frank’s requirement that the CFPB be independent and set a dangerous precedent for independent agencies throughout the executive branch,” English said.

But according to the Trump Justice Department, the White House wouldn’t have the prerogative of appointing an acting director if Congress hadn’t invested all the CFPB’s power in a single director.

The Office of Legal Counsel’s opinion, signed by OLC Assistant Attorney General Steven Engel, actually concedes several points to Cordray, English and their allies.

OLC acknowledged that Dodd-Frank’s statutory succession plan elevates the deputy director. It also agreed the plan is triggered when the director resigns, opining that a resignation amounts to an “absence or unavailability.”

The OLC memo said, however, that the CFPB provisions exist alongside the Federal Vacancies Reform Act. Under DOJ’s interpretation of the statutes, either succession mechanism can be used to fill a temporary vacancy for CFPB director: The deputy director can step in or the president can appoint as acting director an official who has already received Senate confirmation for a different job.

According to the OLC, when contrasting succession regimes operate “in parallel,” the president has the final word.

“When the president designates an individual under the Vacancies Reform Act outside the ordinary order of succession, the president’s designation necessarily compels,” the OLC opinion memo said.


So how does the CFPB’s controversial structure affect the analysis? As the OLC memo explains, the FVRA does include some exceptions to the rule of presidential prerogative in order to preserve the independence of certain executive branch agencies.

The law specifically excludes the appointment of acting directors to “any entity that … is composed of multiple members.”

The CFPB is not governed by multiple members, the OLC memo argued, so it’s covered by the FVRA — which gives the president the right to appoint an acting director. The vacancies statute predates Dodd-Frank, OLC argued, so Congress could have excluded the CFPB director from FVRA coverage. It didn’t, and the “multiple member” exclusion doesn’t apply to the CFPB’s one-man show.

There are all sorts of other arguments the courts will have to consider when they decide who’s really in charge at the CFPB. A very recent Trump appointee, U.S. District Judge Timothy Kelly of Washington, was assigned the English case Monday, so he’ll have the first crack at it.

As the case moves ahead, however, it’s worth wondering whether the Senate might have avoided the whole mess by appointing commissioners to head the CFPB, as the early House-passed version of the bill mandated, instead of appointing an all-powerful director.

Alison Frankel is a columnist for Reuters.