In an interesting turn of events over Thanksgiving weekend, outgoing Consumer Financial Protection Bureau (CFPB) Director Richard Cordray promoted CFPB Chief of Staff Leandra English to the position of CFPB deputy director on November 24, 2017. This move was intended to allow Ms. English to take advantage of a provision of the Dodd-Frank Act that allows the deputy director of the CFPB to “serve as acting Director in the absence or unavailability of the Director.” The deputy director is appointed by the director, and does not need Senate confirmation. Later on Friday, President Trump announced that he is designating Office of Management and Budget (OMB) Director Mick Mulvaney as acting director of the CFPB, a position he would serve in until a permanent director is nominated and confirmed.

Late Sunday evening, Deputy Director English filed a lawsuit in the U.S. District Court for the District of Columbia seeking to halt President Trump’s appointment of Mulvaney, who is also named in the lawsuit. The Justice Department was expecting to file an order last night responding to the lawsuit. Judge Timothy Kelly, a Trump-appointed judge who was confirmed by the Senate in September, said he would review the Justice Department’s filing and decide on the next steps in the case after that.

The core legal question is whether the President has the authority under the Federal Vacancies Reform Act (FVRA) to designate Mulvaney as the acting director of the CFPB following the resignation of Cordray as of midnight, Friday, November 24, 2017, even if the deputy director otherwise could act under 12 U.S.C. § 5491 (b)(5) [the Dodd-Frank Act]. Mary McLeod, the CFPB’s General Counsel, issued a written memo to CFPB staff on Saturday confirming her oral advice to the CFPB’s senior leadership team that the answer is “yes.” She advised all CFPB personnel “to act consistently with the understanding that Director Mulvaney is the Acting Director of the CFPB.” Her reasoning was based on statutory language, legislative history, precedent from the Office of Legal Counsel at the Justice Department, and case law, which in her view, “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.” As General Counsel for the CFPB, it is McLeod’s legal opinion “that the President possesses the authority to designate an Acting Director for the Bureau under the FVRA, notwithstanding § 5491(b)(5).” The Justice Department’s Office of Legal Counsel supports this position as well, noting that the President “may designate an Acting Director of the CFPB under 5 U.S.C. § 3345 (a)(2) or (3), because both the [Federal] Vacancies Reform Act and the office-specific statute are available to fill a vacancy in that office on an acting basis.”

Mulvaney addressed reporters yesterday afternoon, where he announced a 30-day hiring freeze effective immediately and a 30-day “immediate freeze on any new rules, regulations and guidance.” This could stall, at least temporarily, the CFPB’s debt collection rulemaking, among other projects. Both Mulvaney and English were present at the CFPB yesterday morning. According to the White House, Mulvaney was given full access to the CFPB director’s office with “full cooperation” from its staff. However, both English and Mulvaney issued dueling emails to staff yesterday morning, and both emails were signed “acting director.” Mulvaney’s email asked CFPB staff to disregard English’s instructions and to inform the CFPB’s general counsel of any communications from her related to Bureau duties. A protest is planned at the CFPB today, and Senator Elizabeth Warren (D-MA) is expected to make remarks.