Might Courts Force Leadership Change at CFPB?

Financial Services Law

The future of the Bureau of Consumer Financial Protection (CFPB) remains uncertain, as the nomination of a permanent director turned controversial, and a New York federal court ruled its structure unconstitutional. Will Acting Director Mick Mulvaney’s continued presence at the helm force a judicial decision?

What happened

In November 2017, President Donald Trump tapped Office of Management and Budget (OMB) Director Mick Mulvaney as acting director of the CFPB. The move triggered a lawsuit, as outgoing Director Richard Cordray appointed Leandra English as deputy director prior to his resignation, attempting to circumvent the Mulvaney appointment.

Now, English has announced her resignation as deputy director. So what triggered the change of heart? For one, while Mulvaney had so far survived English’s legal challenge to the appointment, the case remained active in the D.C. Circuit.

Pursuant to the Federal Vacancies Reform Act, the acting director may generally serve a maximum term of 210 days, which term was set to end June 22, 2018. Prior to that date, however, President Trump announced the nomination of Kathy Kraninger for the permanent position of director of the CFPB—a move that, by law, restarted a new maximum 210-day term for Mulvaney. That move, said English, triggered her decision to resign and give up the battle.

While any Mulvaney acolyte was likely to start a fight along party lines, Kraninger’s lack of experience in a leadership position and possible ties to the administration’s former policy of separating migrant children from their families at the border made the challenge of congressional confirmation even greater.

The CFPB faces additional courtroom and political battles, including whether the CFPB will appeal a decision from a New York federal court that its structure is unconstitutional and criticism from stakeholders as they struggle to respond to the dozen Requests for Information published earlier this year, lacking the time and/or resources to respond to important policy questions.

Why it matters

Many questions about the CFPB remain unanswered, including whether Kraninger will be confirmed and installed as its head and how other courts address the New York ruling. The uncertainty is bad for both consumers and industry, and Congress should consider whether structural changes, such as a commission format, might better serve the CFPB’s many constituents.