While the rest of the country was scattering for Thanksgiving celebrations, Richard Cordray, Director of the Consumer Financial Protection Bureau (CFPB or Bureau) since July 17, 2013, was quietly plotting his own succession. Here is a brief chronology:

  • On Wednesday, November 15, 2017, Cordray sent a letter to CFPB staff and President Trump to advise that he was leaving his post at the end of the month; Cordray did not provide the President with a specific date for his departure.
  • Immediately upon Cordray's announcement, speculation circulated that Mick Mulvaney, current Director of the Office of Management and Budget (OMB), would be named Acting Director of the CFPB while President Trump sought a permanent replacement who would have to be confirmed by the Senate.
  • On Friday, November 24, 2017, at approximately 2:30 PM, Cordray announced that he had appointed Leandra English, the CFPB's current Chief of Staff, as the Bureau's Deputy Director and that he would resign at midnight that day. Since August 2015, the Bureau has had no permanent Deputy Director. David Silberman, who serves as the Associate Director of Research, Markets and Regulation, had been serving as the Acting Deputy Director. The appointment of English returned Silberman to his Associate Director role.
  • Prior to Cordray's midnight resignation, President Trump appointed Mick Mulvaney as Acting Director of the CFPB.
  • On Saturday, November 25, 2017, the Justice Department issued a Memorandum setting forth the President's legal authority to designate Mulvaney as Acting CFPB Director.
  • Late Sunday evening, November 26, 2017, Leandra English, on behalf of herself and not the Bureau, filed a complaint for declaratory and injunctive relief in federal district court in Washington D.C., seeking an emergency temporary restraining order (English TRO) declaring her the Acting Director of the CFPB, among other requests for relief.
  • On Monday morning, information surfaced that the General Counsel of the CFPB notified Bureau leadership over the weekend that she agreed with the Administration's position and that Mulvaney was, in fact, the Acting Director.

What has transpired is nothing short of a reality show with the media teasing the event as a "showdown": who would be the rightful Director and what would happen come Monday morning?

What are the relative positions?

Supporters of English's position argue that under 12 U.S.C. §5491(b)(5) of the Dodd-Frank Act, the "Deputy Director shall serve as Acting Director [of the Bureau] in the absence and unavailability of the Director." Cordray's resignation, supporters argue, creates an "absence or unavailability" and is the trigger to allow the then serving Deputy Director to assume the role as Acting Director until a permanent Director is confirmed by the Senate. The Administration sees it differently and points to the Federal Vacancies Reform Act of 1998 (FVRA), 5 U.S.C. § § 3345-2239d, which provides the President with authority "for temporarily authorizing an acting official to perform the functions and duties" of an officer of an Executive agency whose appointment "is required to be made by the President" with the advice and consent of the Senate.

So who is correct?

Supporters of English's view say that when Congress enacted Dodd-Frank, it deliberately chose to depart from the provisions of the FVRA. The House version of Dodd-Frank specifically spoke of a vacancy of the Director with the Acting Director being appointed in the manner provided in the FVRA. The final version of Dodd-Frank did not include the House version and instead adopted the current language of § 5491(b)(5). English's supporters also point to § 3347(a) of the FVRA, which states that it is the "exclusive means" for authorizing acting service unless another statute expressly designates an officer to serve in an acting capacity or provides for an alternative means for a designation as an acting officer. Since Dodd-Frank provides a mechanism for an appointment of an acting Director, this camp says it "trumps" the FVRA.

The English TRO also argues that Mulvaney's appointment is unlawful as a violation of "foundational principles of agency independence that Congress codified in Dodd-Frank." English asserts that the President "cannot install a self-serving White House Staffer as an acting head of an independent agency." However, Senate-confirmed Mulvaney as Director of OMB is organizationally positioned within the Executive Branch. While the complaint makes much of this relationship, arguing it has special significance when an independent agency is at issue, the same direct reporting relationship to the President would be true of other Senate-confirmed heads of Executive Branch departments, the requirement imposed by the FVRA for filling vacancies.

The Department of Justice (DOJ) Memorandum outlines two arguments in support of Mulvaney's appointment. First, § 5491(b)(5) does not otherwise eliminate the President's authority under the FVRA, which is not the "exclusive means" available but rather an option available to the President as a means for filling a vacancy. DOJ points to several instances, prior to the enactment of Dodd-Frank, in which the President had authority to designate an acting officer under the FVRA even though a separate and specific statute provided a mechanism for a designated official to assume the role in the event of absence or vacancy. One Circuit Court case is directly on point, including the fact that it involved an independent agency. In Hooks v. Kitsap Tenant Support Services, Inc., 816 F.3d 550 (9th Cir, 2016), the President appointed an Acting General Counsel for the National Labor Relations Board (NLRB). The appointment was challenged because of the National Labor Relations Act (NLRA), similar to Dodd-Frank, specifically provided for the temporary designation of an Acting General Counsel. The court disagreed and found that neither the FVRA nor NLRA were the exclusive means of appointing the official and the President was free to elect between the two statutory alternatives. The Justice Department Memorandum argues that had Congress wanted to abandon the availability of the FVRA, it would have specifically stated this intention.

Although the CFPB is an independent agency, the DOJ Memorandum also points out that such an agency and its director do not fall within a category of officers Congress excluded from the FVRA. In a bit of irony, § 3349c states that FVRA shall not apply to "any member ... [of] a board, commission or similar entity that is composed of multiple members." Thus the CFPB Director is subject to FVRA because that office is constituted as a single directorship, not the board or commission many interested parties wanted, and Congress did nothing to exclude its coverage in Dodd-Frank.

Cordray's attempt to dictate his successor is unprecedented. This "stunt" has created chaos inside the Bureau and in the regulated community, especially since the Bureau's General Counsel seems to be siding with the Administration. Nevertheless, the end result is considerable uncertainty in the financial service markets. Ultimately, it will be the consumers who suffer.