Who Heads the CFPB?

By: Miles Pringle

January 2018


The Consumer Financial Protection Bureau (“CFPB”) made news recently when, on November 27, 2017, two persons showed up at the Consumer Financial Protection Bureau claiming to be its Acting Director. This was a result of the former CFPB Director, Richard Cordray, appointing his chief of staff, Leandra English, to serve as Deputy Director of the CFPB, and resigning his post on the same day to run for Governor of Ohio (November 24, 2017). It was Mr. Cordray’s explicit intent for Deputy Director English to serve as Acting Director of the CFPB, until his successor was approved by the Senate. On that same day, President Trump designated John Michael (“Mick”) Mulvaney, Director of the Office of Management and Budget, to serve as Acting Director of the CFPB. Subsequently, Deputy Director English sued for declaratory judgement that she is the Acting Director, and not Director Mulvaney.

As background, Article II of the Constitution requires that the President obtain Senate approval prior to appointing certain officers of the United States. NLRB v. SW Gen., Inc., 137 S. Ct. 929, 934-35 (2017). As we do not want the responsibilities of such offices to go unperformed due to vacancies (or the President and Senate may not promptly agree on a replacement…), Congress provided that the President may direct certain officials to temporarily carry out the duties without Senate confirmation. Id; citing the Federal Vacancies Reform Act of 1998 (“FVRA”). “The general rule is that the first assistant to a vacant office shall become the acting officer. The President may override that default rule by directing either a person serving in a different [Senate approved] office or a senior employee within the relevant agency to become the acting officer instead.” Id.

At the heart of this dispute is a question of statutory interpretation. The CFPB’s enabling statute, the Dodd-Frank Act, provides that the Deputy Director, who is appointed by the Director, shall “serve as acting Director in the absence or unavailability of the Director.” 12 USCS § 5491(b)(5). Deputy Director English, and several drafters of the Dodd-Frank Act, assert that “absence or unavailability” includes a Director’s resignation. The President, on the other hand argues that FVRA applies, under which he has the authority to name the Acting Director.

In her Complaint, Deputy Director English argues that the FVRA is a gap filler statute, and that Dodd-Frank is a “later-enacted, more specific, and mandatory text.” The Complaint also points to earlier versions of the Dodd-Frank Act that incorporated the FVRA, but was removed and replaced by in the final bill. Deputy Director English’s pleadings additionally argues that even if the President does have the authority to appoint an acting director, naming Director Mulvaney is an abuse of that discretion because he will not resign as OMB Director, an office that serves at the pleasure of the President, thereby undermining the CFPB’s statutorily mandated independence.[i]

Citing a Ninth Circuit Opinion (and several government memoranda), the attorneys for the government argue that Dodd-Frank is not the exclusive authority on this issue. Rather, the President may choose between Dodd-Frank or the FVRA. See Hooks ex rel. NLRB v. Kitsap Tenant Support Servs., 816 F.3d 550, 556 (9th Cir. 2016) (“neither the FVRA nor the [National Labor Relations Act] is the exclusive means of appointing an Acting General Counsel of the NLRB. Thus, the President is permitted to elect between these two statutory alternatives to designate an Acting General Counsel.”).

Deputy Director English addresses the Hooks opinion by stating that the existence of one statute’s compatibility with the FVRA does not mean that it “will always be an available alternative.” Both statutes at issue in Hooks provided the President with authority to appoint an acting officer, whereas Dodd-Frank provides no authority to the President to appoint an acting director. Thus, “[w]here two statutes provide a mechanism by which the same person ([i.e.] the President) may fill the same vacancy (the vacancy left by the General Counsel), it makes sense that the President is permitted to elect between these two statutory alternatives… in contrast, the statute governing the position of Acting Director does not empower the President or someone he controls to fill the vacancy; it instead provides for the automatic succession of the Deputy Director to the position of Acting Director.”

The General Counsel for the CFPB has sided with the President and Director Mulvaney. Mary McCloud, hired in December 2015, and a career government lawyer (primarily in the Department of State), wrote a letter on November 25th shrewdly outlining the issues.  The letter acknowledges, “there is a debatable question as to whether the phrase ‘absence or unavailability’ is broad enough to provide authority for the Deputy Director to serve as Acting Director in the situation of a vacancy created by a resignation. On the one hand, it could be argued that a vacancy—as opposed to a temporary absence or other unavailability—does not qualify as an ‘absence or unavailability’… On the other hand, the common meaning of ‘unavailability’ arguably encompasses vacancies. ‘Unavailable’ means ‘not available,’ i.e. not ‘[q]ualified and willing to serve.’”  Ms. McCloud concluded that “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.”

Another interesting aspect of the CFPB, as noted in a previous article, is that in 2016 the D.C. Circuit Court of Appeals ruled that the CFPB was “unconstitutionally structured” because the Director could only be removed for cause, as opposed to at will by the President. See PHH Corp. v. CFPB, 839 F.3d 1, (D.C. Cir. 2016), reh'g en banc granted, order vacated, (Feb. 16, 2017). While the Court has yet to rule following rehearing, it originally called the CFPB and similar agencies “a headless fourth branch of the U.S. Government” with significant powers over U.S. citizens. As such, the Court opined that independent agencies must be headed by multi-member commissions or be accountable to the President. While the Judge (Hon. Timothy Kelly, recently confirmed in September by a 94-2 vote) has reasons to rule for either party, the idea of an unelected official being able to appoint his successor at such a large agency, intermediately or not, may not sit well with him. 


[i] This argument is moot because If the FVRA applies, then Director Mulvaney is specifically allowed to be appointed as “a person who serves in an office for which appointment is required to be made by the President, by and with the advice and consent of the Senate.” 5 U.S.C. § 3345 (a)(2). If the FVRA does not apply, then President Trump cannot appoint anyone.


©PRINGLE® 2018

This Article was originally published in Oklahoma County Bar Association’s Briefcase Vol. 50 No. 12 in December 2017.