When Richard Cordray officially resigned as director of the Consumer Financial Protection Bureau last month, the agency was thrown into disarray after a fight emerged over who would replace Cordray.
Cordray appointed Leandra English to serve as acting director to “ensure a smooth transition,” but President Donald Trump didn’t agree with Cordray’s pick, or his right to choose his replacement, and nominated Mick Mulvaney, who currently serves as director of the Office of Management and Budget as the acting director.
Mulvaney has long been outspoken about his dislike for the CFPB, and his appointment set off a legal battle of who’s really in charge of the CFPB.
A federal judge sided with Trump, handing control over to Mulvaney as the acting director until the Senate confirms a permanent CFPB director. But nearly 30 Congressional Democrats recently vowed to continue fighting to displace Mulvaney and replace him with English, Cordray’s choice.
Now, Democrats have what may seem like an unlikely ally in their fight over Mulvaney leading the CFPB – a financial institution that is regulated by the CFPB.
On Wednesday, Lower East Side People’s Federal Credit Union, a credit union based in New York, filed a lawsuit against Trump and Mulvaney over the “illegal hostile takeover” of the CFPB by the Trump administration.
Lower East Side People’s Federal Credit Union’s lawsuit claims that English is the “only lawful Acting Director” of the CFPB and asks the District Court of the Southern District of New York to remove Mulvaney.
“President Trump has attempted an illegal hostile takeover of the CFPB, throwing the Credit Union and other credit unions and banks into a state of regulatory chaos,” the lawsuit states. “Even worse, defendant Trump has purported to appoint an Acting Director whose mission is to destroy a Bureau that protects thousands of the Credit Union’s members.”
The lawsuit states that the credit union “does not know who is validly in charge of the CFPB, who is authorized to make the rules, or whose rules to follow.”
At issue in the fight over who’s in charge of the CFPB is a conflict over which federal law applies in this case. As the lawsuit states, the Dodd-Frank Act created the CFPB as an independent federal agency, to be led by a single director.
The lawsuit argues, as English did when she sued Trump, that Dodd-Frank establishes that the acting director of the CFPB will be agency’s deputy director “in the absence or unavailability of the Director.”
But Trump claimed that the Federal Vacancies Reform Act gave him the authority to install an acting director of his choice at the CFPB.
The lawsuit states that Trump’s appointment of Mulvaney is in violation of Dodd-Frank. Additionally, the lawsuit claims that under the Vacancies Reform Act, the President cannot appoint an acting director to an independent multi-member board or commission without Senate approval.
“But that is exactly what President Trump did. The Acting Director of the CFPB is by operation of law one of the five members of the board of the Federal Deposit Insurance Corporation, an independent agency,” the lawsuit states. “Defendant Trump has appointed his at-will employee, Mr. Mulvaney, to serve on the FDIC board. That is plainly illegal.”
Additionally, the lawsuit claims that even if Trump had the authority to install an acting director, he cannot choose an administration official.
“Even if President Trump could appoint someone as CFPB Acting Director (he cannot), he cannot appoint a White House employee who serves at his whim and pleasure to run this independent agency,” the lawsuit states. “A major purpose of the Dodd-Frank Act was to create a CFPB independent of the President and insulated from political pressure. The purported Mulvaney appointment destroys CFPB independence altogether.”
The lawsuit is seeking an injunction barring Trump from naming a replacement for Cordray without Senate approval.
“We support the CFPB as a protector of our low income members’ financial rights, and fear that the appointment of an Acting Director beholden to the White House could result in upheaval and ultimate dissolution of this critical agency,” said Linda Levy, CEO of Lower East Side People’s Federal Credit Union. “Having experienced the devastation that the 2008 mortgage crisis wreaked on our low income members, we need the CFPB to protect communities targeted by financial predators.”
Ilann Maazel, a partner at Emery Celli Brinckerhoff & Abady, and lead counsel for the credit union, used even more colorful language to describe Trump’s actions.
“This is a naked, illegal power grab by Donald Trump to destroy an agency that helps and protects millions of ordinary Americans,” Maazel said. “The law requires Leandra English to be CFPB’s Acting Director.”
