A Tale of Two Directors

Analysis: Understanding the legal arguments at stake in the fight over the CFPB

White House Budget Director Mick Mulvaney, President Donald Trump's pick for acting director of the Consumer Financial Protection Bureau / Getty Images
• November 29, 2017 5:00 am


Employees of the Consumer Financial Protection Bureau (CFPB) reported to work on Monday unclear as to who, exactly, was directing their agency.

Richard Cordray, the agency's first, and thus-far only, full director, resigned on Friday amid speculation he will run for the Democratic nomination for governor of Ohio in 2018. Before his departure, Cordray appointed bureau chief of staff Leandra English as deputy director.

The Trump administration had previously announced its intention to appoint Mick Mulvaney, director of the Office of Management and Budget, as acting director of the CFPB until a replacement could be nominated and appointed. After Cordray's departure, Trump officially appointed Mulvaney as acting director.

This seemingly innocuous move has touched off a legal firestorm. According to at least one interpretation of The Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), the deputy director—English—serves as acting director in the "absence or unavailability" of the director. However, Trump claims that he has the right to appoint an acting director under the Federal Vacancies Reform Act of 1998 (VRA), which permits the president to fill one senate-confirmable role with an officer already confirmed by the Senate for a different position.

English sued the administration on Sunday in an effort to block Mulvaney's appointment; the administration responded on Monday. Late Tuesday afternoon, a U.S. District court judge ruled in favor of the administration, denying English’s request for a temporary restraining order. English's lawyer, Deepak Gupta, said that while English was considering her next steps, "There needs to be an answer from the courts. There needs to be a final answer."

While an initial ruling has been made as to English’s restraining order, the question still remains: who's the real head of the CFPB? It depends on whose legal argument you support.

English's Argument

English's case turns on the language of Dodd-Frank, which stipulates that the deputy director shall a) "be appointed by the Director" and b) "serve as acting Director in the absence or unavailability of the Director."

Why doesn't Mulvaney's appointment as acting director necessarily resolve the "absence or unavailability of the Director?" The position of director is appointed by the president with the advice and consent of the Senate, advice and consent which Mulvaney in his capacity as acting director lacks. Because the acting director isn't the director per se, a holder of that office is still absent or unavailable. Ergo, English is acting director.

This situation, English's initial complaint contends, is intentional. "As an additional measure of independence," it reads, "Congress ensured that the President could not circumvent the need for Senate confirmation by naming a temporary replacement for a Director who leaves before the expiration of his or her term. Instead, Congress provided that the Bureau's Deputy Director, who is ‘appointed by the Director,' shall ‘serve as acting Director in the absence or unavailability of the Director.'"

English argues this stipulation overrides the VRA, which "does not control where, as with the Dodd-Frank Act, ‘a statutory provision expressly … designates an officer or employee to perform the functions and duties of a specified office temporarily in an acting capacity.'"

Her complaint notes that an earlier version of Dodd-Frank did not include the deputy directorship, instead deferring to the VRA, which she contends is evidence that the final bill intended to supplant the VRA for purposes of bureau independence.

Nina A. Mendelson, a professor of law at the University of Michigan, sides with English, contending that to her reading, the deputy director section of Dodd Frank is mandatory.

"The central concern of the debate over who will be Acting Director of the CFPB is not presidential control, but the Senate's constitutional advice and consent function. [Dodd-Frank] ensures continuity in agency function during a vacancy, while also protecting Senate confirmation prerogatives from potentially strategic presidential action, much like the FVRA's time limits on acting appointments, including those made by the President," Mendelson writes.

The White House's Retort

The administration's response contends that "it is well established that neither [the CFPB's status as an independent agency nor the Dodd-Frank Act's provision] is sufficient to take an agency outside the scope of the VRA." This, they argue, was both accepted at the time of the VRA's passage, and was recently reinforced by a Ninth Circuit ruling which allowed the VRA to be applied even "to an independent agency with its own default succession statute."

The VRA, the administration says, remains "available" as a means for filling vacancies. Whereas English reads the VRA as not having authority in situations where a succession is specified by statute, the administration contends that in such situations the VRA is simply not "exclusive," i.e., that the position could be filled either through succession or by the president under the terms of the VRA.

The White House's position—that Mulvaney is rightly acting director—has the support of both the White House counsel's office, and of Mary McLeod, the CFPB's general counsel. McLeod concluded in a Saturday memo that "I advise all Bureau personnel to act consistently with the understanding that Director Mulvaney is the Acting Director of the CFPB."

Adam White, a professor at George Mason's Antonin Scalia Law School and Director of the Center for the Study of the Administrative State, agrees with this analysis, pointing to JEM Ag Supply v. Pioneer Hi-Bred Int'l, in which SCOTUS explained that "when two statutes are capable of coexistence, it is the duty of the courts, absent a clearly expressed congressional intention to the contrary, to regard each as effective." In other words: if the statutes can be read to work together, they must be. 

University of Georgia Professor of Law Kent Barnett argues that since the CFPB is not a "department" for constitutional purposes, Dodd-Frank's stipulation that the director can appoint any inferior officers, including the deputy director, is unconstitutional.

What Comes Next? 

As mentioned above, it is possible that English may seek further legal remedy. If her case is considered by the full court, it may be another opportunity to consider the overall constitutionality of the CFPB. Designed as it is to resist "politicization," the bureau is often perceived by both supporters and detractors as an attempt to create a "fourth branch" of government, unaccountable to either the executive or the legislative.

This has already been found partially unconstitutional. Earlier this year in PHH v. CFPB, a three-judge panel of the DC Circuit court of appeals found that Dodd-Frank's requirement that the CFPB Director could only be fired for cause, as opposed to at the president's discretion, was unconstitutional.

That ruling is currently awaiting the opinion of the full court. It, along with the English v. Trump, may signal the future for the bureau and for all similar "administrative state" organizations.