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Friday, April 10, 2020

Federal judge refuses to block Trump’s designation of Mulvaney as interim head of CFPB

By Jessica Karmasek | Nov 30, 2017

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WASHINGTON (Legal Newsline) - A federal judge on Tuesday rejected arguments by Leandra English, who was named the deputy director of the Consumer Financial Protection Bureau by outgoing director Richard Cordray, in a lawsuit she brought over the agency’s interim leadership.

Judge Timothy J. Kelly for the U.S. District Court for the District of Columbia, according to a minute order and entry on the case docket, denied English’s emergency motion for temporary restraining order after a motion hearing held Tuesday.

English filed her lawsuit Sunday night in attempt to block President Donald Trump’s naming of Office of Management and Budget Director Mick Mulvaney as the bureau’s acting director.

In a minute order filed Wednesday, Kelly said the parties will meet, confer and submit by Dec. 1 a joint proposed schedule for briefing the merits and/or for briefing a preliminary injunction, or separate schedules.

Edward Lenci, a partner at the New York office of Hinshaw & Culbertson LLP, recently wrote a blog post on the CFPB leadership dispute.

He contends Cordray’s “parting-shot” -- naming his own successor -- will likely “miss its mark.”

Lenci, a commercial litigator, has presented on the CFPB’s arbitration rule and won a class action defense victory before the U.S. Supreme Court.

“This outcome does not surprise me given my reading of both (the) Dodd-Frank (Wall Street Reform and Consumer Protection Act) and the Federal Vacancies Reform Act,” he said.

“Despite Ms. English’s threat to continue the fight, this ruling allows Mr. Mulvaney to begin focusing on fulfilling the President’s pledge to tame the CFPB.”

Richard J. Andreano Jr., a consumer finance attorney, agreed, saying the “better view” is that the President can appoint an acting director under the FVRA.

“Even the CFPB general counsel advised in a memo to the senior leadership team at the CFPB that the President has authority under the Federal Vacancies Reform Act to appoint an acting director,” said Andreano, who is the practice leader of Ballard Spahr LLP’s Mortgage Banking Group.

“The Justice Department also reached the same conclusion.”

The DOJ memo was written by Assistant Attorney General Steven Engel, who until recently represented an offshore payday lender being sued by the CFPB.

Nonetheless, Andreano said the issue is whether the Dodd-Frank provision, which refers to the “absence or unavailability” of the director applies when the director has resigned, or only applies when the director is temporarily absent or unavailable.

“Even if the Dodd-Frank provision applies, however, that does not mean that the Federal Vacancies Reform Act does not also apply,” he explained, noting there is a “significant” structure issue here.

“If the deputy director could become the CFPB director upon the resignation of the director nominated by the President and confirmed by the Senate, this would mean that a person who was not selected by a President, with Senate approval, could act as director and could not be removed by the President except for cause,” Andreano said.

English, who describes herself as the “rightful” acting director of the CFPB, argues Dodd-Frank mandates that the deputy director “shall.... serve as the acting Director in the absence or unavailability of the Director.”

She contends Trump disregarded the statutory language in issuing a press release Friday evening designating Mulvaney as the acting director.

“Under this scenario, Mr. Mulvaney would seek to serve indefinitely as the interim head of a statutorily ‘independent’ agency while simultaneously occupying his current White House post,” English wrote in her nine-page complaint.

The White House, in its news release Friday, said Mulvaney will serve as acting director until a permanent director is nominated and then confirmed by the U.S. Senate.

“The President looks forward to seeing Director Mulvaney take a common sense approach to leading the CFPB’s dedicated staff, an approach that will empower consumers to make their own financial decisions and facilitate investment in our communities,” according to the statement.

Earlier Friday, Richard Cordray officially stepped down as director of the bureau and, in doing so, named English as the bureau’s deputy director.

Cordray, a Democrat, has headed the Obama-era watchdog agency since its creation. He told colleagues in a message earlier this month that he was stepping down at the end of November.

From Legal Newsline: Reach Jessica Karmasek by email at

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Ballard Spahr, LLPConsumer Financial Protection BureauWhite HouseU.S. District Court for the District of Columbia