War Over Leadership of Consumer Banking Watchdog Heads to Court

WASHINGTON (CN) - President Donald Trump’s bid to install the next head of a national consumer watchdog prompted a federal complaint late Sunday from the last director’s chosen successor.

The lawsuit by Leandra English, who became acting director of the Consumer Financial Protection Bureau just over a week ago, was filed late Sunday night in U.S. District Court for the District of Columbia.

Represented by Gupta Wessler, English wants a temporary restraining order to block Trump’s nominee, Mick Mulvaney, from taking over the office.

A former congressman who also heads the Office of Management and Budget, Mulvaney reportedly showed up at CFPB headquarters this morning to take the reins of an agency he has criticized as a “joke” and an example of bureaucracy run amok. He is expected to dismantle much of what the bureau has done.

English was named acting CFPB chief by outgoing director, Richard Cordray, who led the bureau since 2013 when it was created under former President Barack Obama in the wake of the financial crisis.

The White House has argued that the president has the authority to appoint Mulvaney under a 1988 law, the Federal Vacancies Reform Act. But English argued that she is the rightful successor to Cordray under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.

"The Dodd-Frank Act is clear on this point: It mandates that the deputy director 'shall ... serve as the acting director in the absence or unavailability of the director,'" her 9-page complaint states.

"This designation of the deputy director as the 'acting director' reflects Congress’s deliberate choice to depart from the default procedure for naming an acting official under the Federal Vacancies Reform Act of 1988," the complaint continues.

Melissa Stegman, senior policy counsel with the nonpartisan Center for Responsible Lending, said the plain language of the Dodd-Frank Act supports English's position.

“The court will have to decide this,” Stegman said in a phone interview. “We think this is a clear reading of the statute so we would hope that the court would support this interpretation and not allow this back door approach that the administration is trying to take right now."

Supporting Mulvaney’s appointment in a statement Monday, the White House cited a memo from the Consumer Financial Protection Bureau’s general counsel that validates President Trump’s authority to install the bureau’s next chief.

“The statutory language, legislative history, precedent from the Office of Legal Counsel at the Department of Justice, and case law all point to the conclusion that the President may use the Vacancies Reform Act to designate an acting official, even when there is a succession statute under which another official may serve as acting,” the 3-page memo states.

The White House also noted that President Barack Obama relied on the same authority when a similar vacancy arose on the National Labor Relations Board.

In Hooks v. Kitsap, the U.S. Court of Appeals for the Ninth Circuit agreed with arguments by the Obama administration that a presidential designation made under the Federal Vacancies Reform Act would supersede an independent agency’s succession statute.

The  Office for Management and Budget and the Consumer Financial Protection Bureau did not respond to emails seeking comment on the lawsuit.

English’s attorney Deepak Gupta declined to comment directly, but issued a statement on the lawsuit.

“The president’s attempt to install a White House official at the head of an independent agency — while allowing that official to simultaneously serve in the White House — is unprecedented,” Gupta said.

English, who says she should serve as the interim director until the Senate confirms a new director, echoed her attorney’s concerns about the agency’s independence in her complaint.

"The president may not, consistent with the statutory requirement of independence, install a still-serving White House staffer as the acting head of an independent agency — particularly when doing so would displace an acting head who has a clear legal entitlement to the position," the lawsuit says.

Congress created the Consumer Financial Protection Bureau as an independent agency in 2010 as part of the Dodd-Frank Act.

Although the president can name a new successor, he cannot fire the director at will.

Cordray announced his resignation on Nov. 15, eight months ahead of when his five-year term would have ended.

The former Ohio attorney general is reportedly eyeing his state’s gubernatorial race for 2018.

Stegman with the Center for Responsible Lending said she is concerned about the agency’s future, voicing concern that Mulvaney could roll back consumer protections enacted by the agency, along with research and data collection.

"Consumer protection is really a nonpartisan issue,” Stegman said. “This should not be a partisan fight, even though unfortunately it is."

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