On his way out the door, Richard Cordray, the director of the Consumer Financial Protection Bureau (CFPB), left a parting gift for President Trump. Announcing his immediate resignation on Black Friday—when Americans are traditionally more focused on recovering from their tryptophan hangovers or mauling one another over the last deeply discounted big-screen television—Cordray appointed Leandra English, his chief of staff, as the deputy director of the CFPB. It was a cunning move to checkmate the president’s efforts to take control of the runaway federal agency.
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.
It was an open Washington secret since Cordray announced his intention to resign earlier in November that Trump was considering designating Office of Management and Budget director Mick Mulvaney as acting director at CFPB. The former Republican congressman 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 be expected to begin the process of unwinding the CFPB’s regulatory overreach.
Cordray made little effort to shroud his real purpose in filling the bureau’s deputy vacancy, a position that had languished unfilled for much of his nearly six-year as director. He noted in a farewell email to the staff that, by virtue of her promotion, English “will become the acting Director” until a successor is nominated by the president and confirmed by the Senate. Hiding behind a claim that he was trying of “minimize operational disruption,” Cordray sought to thwart the president’s ability to designate Mulvaney—or anyone else for that matter—as acting director.
Long rumored to be seeking the Democratic nomination in Ohio’s 2018 gubernatorial race, Cordray demonstrated one ostensible qualification for high office seekers: the ability to engage in petty politics. Trump may ultimately be able to appoint a successor who can undo much of what Cordray has done, but, if Cordray has his way, Trump won’t get his hands on the CFPB anytime soon.
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There are compelling reasons for Trump to want to get started. 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.
Never one to shy from a public spat, the president wasted no time in responding. Within hours, Trump formally designated Mulvaney as acting director of the CFPB, invoking his broad general statutory authority to temporarily fill federal offices under the Vacancies Reform Act of 1988. The General Counsel of the CFPB issued a memorandum concurring in the President’s action, seemingly paving the way for Mulvaney to take charge. Yet, remarkably, late Sunday evening, English filed a lawsuit to force Mulvaney out and keep control over the agency.
Thus the CFPB has been thrown into chaos, setting up a modern War of the Roses to control a so-called “independent” agency that governs large swaths of the economy under the guise of consumer protection. Two officials claim authority—under separate designations relying on different statutory authority—to act as director until a successor is properly appointed and confirmed. This high-stakes bureaucratic war will be settled in the courts.
Who is likely to prevail?
The 2010 Dodd-Frank Act, which created the CFPB, specifically 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.” At the same time, the 1998 Vacancies Reform Act 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 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.”
Cordray’s defenders argue 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.
Massachusetts senator Elizabeth Warren thus proclaimed English to be the proper acting director, declaring that the “Dodd-Frank Act is clear: if there is a CFPB Director vacancy, the Deputy Director becomes Acting Director.” “President Trump,” she announced, “can’t override that.”
But there are problems with this position. First, the Vacancies Reform Act does not say that 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. The Department of Justice’s Office of Legal Counsel (OLC) has long taken the position that the president can designate an acting official under the Vacancies Reform Act even where, as here, another statute seemingly mandates that another official shall perform the duties of the office in an acting capacity.
In very similar circumstances, OLC declared President George W. Bush had the authority to designate an acting OMB director, notwithstanding a separate statute providing that the deputy OMB director “acts as the Director when the Director is absent or unable to serve or when the office of Director is vacant.” OLC has drawn support for this interpretation from the legislative history of the Vacancies Reform Act. A Senate Report preceding the statute provided that “even with respect to the specific positions in which temporary officers may serve under the specific statutes this bill retains, the Vacancies [Reform] Act would continue to provide an alternative procedure for temporarily occupying the office.”
Relying on that precedent, OLC publicly released an opinion supporting the president’s designation of Mulvaney during the Thanksgiving weekend. It concluded that the president’s authority to appoint an acting director co-exists with Dodd Frank Act’s delegation of acting director authority to the deputy director. OLC noted that the only court to have considered the issue, the liberal Ninth Circuit Court of Appeals, agreed with its interpretation in a dispute involving the National Labor Relations Board Office of General Counsel, concluding that the president may elect which avenue to choose where another statute also authorizes a method of temporarily filling a vacancy.
Curiously, in advising Trump that his actions here are legal, OLC explicitly rejected an approach to harmonizing the two statutes that would have provided even stronger support for the president’s action: It is possible to read the Dodd-Frank Act as not addressing vacancies in the office of CFPB director at all.
Unlike the OMB statute, which explicitly applies “when the office of Director is vacant,” and any number of similar federal statutes that also explicitly address vacancies in office, the Dodd-Frank Act permits the Deputy Director to act only “in the absence or unavailability of the Director.” Congress knows how to authorize an official to act in the event of a vacancy, and, for whatever reason, it did not use similar sufficiently precise language here.
Interpreting the Dodd-Frank language not to apply to vacancies in the directorship would fully harmonize the two statutes without depriving either of meaning. In rejecting this argument, OLC’s lawyers effectively deprived their Department of Justice colleagues, who will be tasked with defending the president’s actions, of a potentially effective litigation position. It’s a decision the White House may come to regret down the road. But for the time being, OLC has provided a reasonable foundation for the president’s action.
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Legal controversy followed Cordray’s CFPB tenure from the moment President Obama first appointed him in 2011. His initial appointment, conferred under the Constitution’s recess appointment clause, was thrown into doubt when the Supreme Court overturned similar recess appointments made on the same day. (The Senate confirmed Cordray before a court could declare his recess appointment invalid, thus mooting the controversy.)
The entire structure of the CFPB, and Cordray’s sole statutory power to oversee the Bureau, was later declared unconstitutional by a panel of the D.C. Circuit Court of Appeals, which held that the statute conferred far too much authority on a single official unaccountable to presidential control. That decision was later vacated and is under review by the entire court, which is dominated by Democratic-appointed judges. An en banc decision may not be the final word, as the Supreme Court may ultimately decide the Bureau’s constitutional fate.
Unless and until the Supreme Court declares the entire CFPB structure unconstitutional, the acting director controversy is likely to be a protracted one. Cordray’s latest gambit, and English’s corresponding lawsuit, asks the courts to keep bureaucratic control of the Bureau away from the only elected official in this drama, President Trump—and given Trump’s early track record before the courts, a federal judge may just grant them their wish. But it would be doing so against the legal advice of both the Department of Justice and the CFPB’s own lawyer.
The dispute and the resulting litigation will cast further doubt over the legitimacy of an already troubled agency—a result that would run counter to Cordray’s stated purpose in launching his little bureaucratic war—but would let him continue to protect his bureaucratic legacy for just a little while longer, at a price of accountability to We the People.
Shannen W. Coffin, an attorney in Washington, D.C., held senior legal positions in the Bush Justice Department and Office of Vice President. As a private lawyer, he has represented clients affected by and opposed to CFPB regulation, including the CFPB’s latest payday and title lending regulation.
