One of two scenarios will likely occur in the near future at the CFPB. Either Director Richard Cordray will be fired by President Trump (for cause), or Cordray will resign to enter the 2018 Ohio gubernatorial race. If either event occurs, some have assumed that Acting Deputy Director David Silberman will inherit the post, and it will be “business as usual” at the CFPB until a new director is nominated and confirmed by the Senate. However, the Federal Vacancies Reform Act of 1998 (the Vacancies Act) will most likely ensure that does not happen.

The Vacancies Act was enacted by Congress in 1998 in response to President Clinton’s appointment of Bill Lann Lee as the Acting Assistant Attorney General for Civil Rights at the Department of Justice after Congress failed to confirm Lee for that position. The Vacancies Act governs how a replacement may be appointed to fill a vacancy at an executive agency when the position requires a presidential nomination and Senate confirmation. 5 U.S.C. § 3345. The director of the CFPB fits this description because the CFPB is “an Executive agency, as defined in [5 U.S.C. § 105].” 12 U.S.C. § 5491.

The Vacancies Act designates three categories of persons who can serve in an acting capacity to replace an officer who “dies, resigns, or is otherwise unable to perform the functions and duties of the office.” Those persons are (1) the “first assistant” to the officer, (2) a person who currently is serving in another officer position appointed by the president and confirmed by the Senate, or (3) another senior-level (GS-15 paygrade or above) employee of the agency, besides the first assistant, who has been employed at the agency for at least 90 of the preceding 365 days.

For the CFPB, the first person in line as the “first assistant” to the director would be Acting Deputy Director David Silberman. However, given the Trump administration’s opposition to the CFPB’s current leadership, President Trump surely will not want Silberman to inherit the role, even temporarily. This leaves the president with the option of appointing either (1) an officer from any federal agency who has already received congressional confirmation or (2) any senior employee of the CFPB who is at the GS-15 paygrade level and meets the tenure requirements.

The Vacancies Act only applies when Congress is silent about how a director-level vacancy should be filled. Some have argued that Congress did mandate how the CFPB director position should be filled when it stated in the Dodd-Frank Act that the deputy director would “serve as acting director in the absence or unavailability of the director.” Id. We believe this is an incorrect interpretation because “absence or unavailability” generally refers to a temporary absence, and not a permanent absence from duty.

For example, the deputy secretary of the Treasury Department is empowered by statute to act as the secretary of the Treasury when “the Secretary is absent or unable to serve or when the office of Secretary is vacant.” 31 U.S.C. § 301 (c)(2) (emphasis added). By including the term “vacancy,” Congress specifically blocked the Vacancies Act from being triggered, but this key term is clearly missing in the Dodd-Frank Act. Therefore, because Congress did not use the term “vacancy” but just “absence and unavailability,” the Vacancies Act should apply to the CFPB director position.

Uncertainty over the CFPB’s leadership places the future of proposed rulemakings, such as the one on high-cost lending, in question. The CFPB director must sign off on a rule before it can be finalized and published in the Federal Register. If Cordray leaves office before that happens, Trump is unlikely to appoint an acting director who would sign off on this controversial rulemaking. If the high-cost lending regulation is published before Cordray leaves office — a likely scenario that could happen as early as Labor Day — a new acting director would not be able to rescind the rule. Any new acting director would need to adhere to the requirements of the Administrative Procedure Act (APA) and publish a notice of proposed rulemaking to rescind or change the rule. This also would apply to the arbitration rule, which has already been finalized.

An acting director may only serve for a maximum of 210 days, and it is unclear whether the APA process could be completed during that time. One would hope that a permanent director would be nominated and approved during the interim period to be able to finalize changes or a withdrawal of both the arbitration and high-cost lending rules.

If Trump fires Cordray, then an attempt to stop the Vacancies Act from controlling the transition process may arise. This would be based on an argument that the Vacancies Act only applies if the vacancy results from death or resignation or when the officer is “otherwise unable to perform the functions and duties of the office.” Clearly the Trump administration does not agree with this view.

The Trump administration interprets the Vacancies Act as allowing it to appoint an acting officer after a removal from office, which happened when Dana Boente was appointed as the acting successor to Acting Attorney General Sally Yates after her firing earlier this year. Courts have not yet answered the question of whether removal for cause constitutes an inability “to perform the functions and duties of the office.”

The question remains: who would be appointed as acting director of the CFPB if Cordray leaves? Looking at the officers whom Trump has appointed and the Senate has confirmed already, it seems most likely that Trump would choose Treasury Secretary Steven Mnuchin or any of the other recent Treasury Department appointees, such as Marshall Billingslea, Christopher Campbell, David Kautter, Drew Maloney, David Malpass, Sigal Mandelker and Brent James McIntosh, to act in the role until a new CFPB director could be appointed and confirmed. Time will tell which of these scenarios is going to occur and when.

Pepper Points

  • The current acting deputy director of the CFPB, David Silberman, is unlikely to become the acting director of the CFPB if Richard Cordray leaves the position.
  • Should Cordray leave office before publishing the final high-cost lending rule, the rule will likely not be published. But it seems more likely that the rule will be published as soon as Labor Day, before he leaves office.
  • A confirmed official at the Treasury would be the logical choice to fill the role of acting director of the CFPB.