Earlier this week, a federal judge refused to grant a temporary restraining order preventing Mick Mulvaney from assuming the reins of the Consumer Financial Protection Bureau (CFPB) as acting director.

What happened

With the media reporting that President Trump intended to nominate Mick Mulvaney as acting director of the CFPB, outgoing director Richard Cordray pulled a surprise move. Rather than waiting to resign until the end of the month as expected, he appointed Leandra English as deputy director and then resigned, effective midnight, Friday, November 24. In so doing, Cordray attempted to circumvent the Mulvaney interim appointment. And when President Trump immediately named Mulvaney, Ms. English filed suit on Sunday, November 26, in the U.S. District Court, District of Columbia, and likewise filed a motion for a temporary restraining order. 

When CFPB employees returned to work from the long holiday weekend, they were faced with two competing acting directors. But is there a likely winner in this dispute? At least one key CFPB employee, general counsel Mary McLeod, agrees with President Trump. Ms. McLeod issued a legal opinion concluding that Mr. Mulvaney is the proper acting director, based on her reading of the relevant statutes, the Federal Vacancies Reform Act (Vacancies Act) and Dodd-Frank. Less surprisingly, the Office of Legal Counsel at the Department of Justice has likewise reached the same conclusion, albeit on different grounds.

So who is the acting director? Under Title 10 of Dodd-Frank, the Consumer Financial Protection Act, the deputy director of the CFPB serves as director in the event of the director’s “absence or unavailability.” But does this language include vacancy as a result of resignation? It is that question the court must resolve. If Dodd-Frank does not address vacancies, the default federal statute (the Vacancies Act) would prevail, and it would more clearly be the president who gets to name an acting director, as he has done here.

The bad news for Ms. English was that her suit was assigned (randomly, we presume) to U.S. District Judge Timothy J. Kelly, who was nominated by Trump. An initial hearing on her suit was held on Monday, November 27, 2017. At the hearing, Judge Kelly requested additional briefing by the DOJ, which it filed late Monday. On Tuesday, November 28, before a packed courtroom, Judge Kelly issued his ruling, siding with the Trump administration and denying the motion for a temporary restraining order.

“On its face,” ruled Judge Kelly, the Vacancies Act “does appear to apply to this situation.” The court likewise rejected that Ms. English faced irreparable harm justifying the extraordinary relief she requested.

Why it matters

Until a formal replacement is confirmed by the Senate, Mulvaney will wield all the powers of the director. But the litigation remains in place, and Ms. English may pursue an appeal or other interim relief. Until the question of who is indeed the acting director is finally resolved, there is uncertainty regarding a number of key pending rulemakings, enforcement actions and supervision issues. The CFPB has been extraordinarily proactive to date, but as Mr. Mulvaney stated earlier this week, “Elections have consequences.” Accordingly, whether under a Mulvaney directorship or an eventual Trump-appointed director, there will likely be a dramatic about-face on some of the more aggressive CFPB tactics, including its repeated regulation by enforcement. Stay tuned.