A Change of the Guard: A Look at Where the CFPB is Today

By: David McGee

 

In November 2017, Richard Cordray stepped down as the head of the Consumer Financial Protection Bureau.[1] Before leaving the bureau, Cordray appointed Leandra English as the Deputy Director attempting to keep the directorship outside of Trump’s hands.[2] However, after Cordray stepped down, Trump appointed Mick Mulvaney to temporarily run the bureau until Trump could nominate and have the Senate confirm a new permanent director. After Mulvaney assumed control of the bureau, English sued in federal court claiming that the Dodd-Frank Act prevented Trump from appointing an interim director, and instead asserted that the Act provided that the deputy director should become the acting director until a Senate confirmed director assumed the position.[3]

Recently, a federal judge ruled in favor of Mulvaney stating that if the court adopted English’s request then directors could effectively pass the directorship from one director to another which has no basis in precedent even among more independent regulatory agencies.[4] In denying English’s request for an injunction, the court relied on the Federal Vacancies Reform Act (FVRA) and the factual background in determining that English’s claim was not likely to succeed on the merits.[5] The court found that in issuing a ruling that the FVRA works in harmony with the Dodd-Frank Act and that as a matter of statutory construction and legislative intent that President Trump had the authority to appoint Mulvaney.[6] English is now in the process of appealing the district court’s decision.

Since assuming the acting director’s position Mulvaney has instituted a number of changes and has attempted to take the bureau in a new direction. In the summer of last year, hackers breached Equifax’s servers and stole the data of millions of Equifax customers. In addition to the hacking, Equifax executives decided not to release the information to consumers and proceeded to sell off massive amounts of the company’s stock. The main types of claims the Consumer Financial Bureau handles are claims found in the Dodd-Frank Act and UDAP (Unfair, Deceptive, Acts and Practices) claims. The Equifax data breach and subsequent cover-up seems like the perfect case for the CFPB, but recently, Mulvaney indicated that the bureau will back off of the Equifax probe and subsequent investigation.[7] This is a surprising announcement since the bureau’s function is at its core consumer protection, and surely, protecting consumers from unscrupulous business decisions falls squarely within the bureau’s mission.

In addition to shying away from the Equifax breach, Mulvaney is attempting to fundamentally reshape the Consumer Financial Protection Bureau. For the most recent quarter, Mulvaney did not request any money from the Fed for the agency’s operations.[8] Additionally, Mulvaney is looking to receive feedback from businesses, whom the CFPB regulates, to look at changing the CID (Civil Investigative Demand) process.[9] Finally, Mulvaney is looking at rolling back the “Payday Lending Rule” Cordray implemented during his time as director.[10]

Although it does not seem likely that he CFPB will be going away anytime soon, the recent changes at the CFPB raise a plethora of legal questions including the overall question of who should be leading the CFPB. As a matter of policy, it is important to have an agency protecting consumers which is more independent from Congress. Having only one director means that although political change can drastically affect the agency, that director is insulated from many of the pressures that other directors have to respond to at other agencies. Despite this, having only one director can lead to problems in both statutory law and can cause agency confusion in times of change.

It is unclear at this time exactly what changes Mulvaney will end up making at the bureau and whether those changes will be permanent or changed again once a permanent director goes through the Senate confirmation process. However, what is clear is that the Consumer Financial Protection Bureau will be going through changes either with Mulvaney still in charge or when a permanent Trump-appointed director takes over. Since the agency is set up for independence from the executive, if Trump appoints a full-time director then the next president, whether it is Trump or someone else will not be able to remove the director unless there is cause.[11] As one of the youngest government agencies, the CFPB is finding its way and will continue to grow regardless of leadership.

 


[1] Renae Merle, Richard Cordray is Stepping Down as Head of the Consumer Financial Protection Bureau, Washington Post, (Nov. 15, 2017) https://www.washingtonpost.com/news/business/wp/2017/11/15/richard-cordray-is-stepping-down-as-head-of-consumer-financial-protection-bureau/?utm_term=.cefa49653915.

[2] Paul Crookston, Judge Rules Mulvaney can still Lead Consumer Financial Protection Bureau, Washington Free Beacon, (Jan. 10, 2018, 9:38 PM) http://freebeacon.com/politics/judges-rules-mulvaney-can-still-lead-consumer-financial-protection-bureau.

[3] Id.

[4] See English v. Trump, No. 17-2534 (TJK) (D.D.C. Jan. 10, 2018) (denying English’s request for injunctive relief and stating that the President had the power to allow Mulvaney to be the acting director).

[5] Id.

[6] Id. (examining the conflicts between the VFRA and the Dodd-Frank Act and concluding that the Act did not supersede the VFRA).

[7] Patrick Rucker, Consumer Financial Protection Bureau Reportedly Scales Back Probe of Equifax, Huffington Post, (Feb. 5, 2018, 3:32 AM) https://www.huffingtonpost.com/entry/cfpb-probe-equifax-curtailed_us_5a7814f6e4b06ee97af48f8f.

[8] Jim Puzzanghera, Mulvaney Request Zero Funding for the Consumer Financial Protection Bureau, Los Angeles Times, (Jan. 18, 2018, 12:40 PM) http://www.latimes.com/business/la-fi-cfpb-mulvaney-funding-20180118-story.html.

[9] Id.

[10] See 81 FR 47864 (July 22, 2016) (explaining the new effects of the Payday Lending rule and its aim to curb payday loans that effectively trap consumers into unpayable loans).

[11] English v. Trump, No. 17-2534, at 3 (TJK) (D.D.C. Jan. 10, 2018) (explaining that Congress specifically stated the CFPB is an independent agency and that the director may only be fired for cause).