It has been almost five months since President Trump installed Mick Mulvaney to temporarily run the Consumer Financial Protection Bureau. With no permanent nominee in sight, he’s been working his way through a conservative wish list for the consumer watchdog agency.
As a legal battle over whether Mulvaney should be running the agency at all moves forward, Mulvaney has asked Congress to change the bureau’s structure in a way that critics say would chip away at its independence. He’s revisiting his Obama-era predecessor’s actions and doing a top-to-bottom review of how the bureau functions and exercises its power. He asked for zero dollars in funding for the second quarter of the fiscal year, saying the bureau had enough money.
Testifying before the Senate Committee on Banking, Housing, and Urban Affairs on Thursday, Mulvaney delighted Republicans and angered Democrats with his plea that they give Congress and the president more say over what the bureau does.
“I don’t know if any director of any bureaucracy has ever come to you and said, ‘Please take my power away,’ but that’s what I’m doing. And to the extent you can do that I think we will all be well served by it,” Mulvaney said.
Conservative and pro-business groups have praised Mulvaney’s tenure as a much-needed course correction from what they saw as overreach by his predecessor, Richard Cordray. Democrats and consumer advocates say Mulvaney, who is also the director of the Office of Management and Budget, is gutting a critical agency that was created out of necessity in the aftermath of the 2008 financial crisis.
While Mulvaney was testifying, the Justice Department was a few blocks away in court defending Mulvaney’s November appointment as acting director. A federal judge in Washington, DC, sided with the administration in January, finding that a challenge to his appointment was unlikely to succeed. The challenger — bureau Deputy Director Leandra English, who claims to be the rightful acting director — appealed, and the US Court of Appeals for the DC Circuit heard arguments Thursday morning.
Mulvaney’s appointment is technically temporary, but Trump has yet to announce a nominee. Under the Federal Vacancies Reform Act, which is the law Trump appointed him under, Mulvaney can serve for 210 days, or longer depending on when Trump announces a nominee.
If judges ultimately find that Mulvaney’s appointment was invalid, it could call into question the legitimacy of actions he’s taken so far, and at a minimum cast a “pall of illegitimacy,” said Brianne Gorod, chief counsel of the Constitutional Accountability Center, which has argued that Mulvaney’s appointment was unlawful.
“Mick Mulvaney has been doing all he can to undermine the bureau as much as he can during his tenure there. And it’s important because his appointment is at odds with the rule of law,” Gorod said.
Kate Larson, director of the US Chamber of Commerce’s Center for Capital Market Competitiveness, said they’ve been pleased with Mulvaney’s approach, and that frustration from Democrats about what Mulvaney is doing now was proof that the changes he’s pushing — such as giving Congress the power to appropriate money to the bureau and approve new bureau rules — are needed.
“They are realizing that they don’t have the type of oversight and influence that they’ve had over the past couple of years with Cordray, because he was working with them,” Larson said. The bureau currently requests funding from the Federal Reserve. Unless Congress has control over the purse strings, she said, “there isn’t true oversight.”
Mulvaney has insisted that as much as he opposed the bureau, he is not trying to undermine its mission now. On Thursday, Arkansas Sen. Tom Cotton, a Republican, asked Mulvaney, “How does it feel to lead an unconstitutional agency?”
Mulvaney replied that he didn’t believe it was his place to offer an opinion.
“I work there, I’ve been appointed by the president to be the acting director, and I think the system starts to break down if people who work at places make their own conclusions about constitutionality,” he said. “If the president tells me it's unconstitutional, I’ll pay attention. I’m assuming it’s constitutional every single day when I go in.”
Still, he concluded his answer to Cotton with a strong suggestion about where his sympathies lie: “But I see your point and it’s well taken.”
Cordray announced on Nov. 15 that he was stepping down; he’s now running for governor of Ohio. His resignation was set to take effect at midnight on Nov. 24. Just before 3 p.m., the bureau sent out a press release announcing Cordray had named English, his chief of staff, as deputy director, putting her in line to serve as acting director. Under the Dodd-Frank Act of 2010, the bureau’s deputy director “shall” serve as director “in the absence or unavailability of the Director.”
Several hours after that announcement, the White House announced Trump had designated Mulvaney as acting director.
English sued, citing Dodd-Frank’s succession order and arguing that Trump’s appointment of a sitting executive branch official struck at the bureau’s independence. US District Judge Timothy Kelly denied her request for an injunction in January, and she took the case to the DC Circuit.
The three-judge appeals panel on Thursday considered how Dodd-Frank’s “shall” language squared with the Federal Vacancies Reform Act, which gives the president broad authority to temporarily fill open executive branch positions.
The judges’ questions included whether English had standing to sue, since it wasn’t clear if the court could block the president from taking action; whether Dodd-Frank’s limits on when the president could remove the director extended to a deputy director serving as acting director; and whether Mulvaney’s position at the Office of Management and Budget uniquely disqualified him, even if the president could fill the vacancy.
Deepak Gupta, the lawyer arguing for English, told the judges that the government’s position would go against Congress’s goal of keeping the bureau independent from presidential will.
“It would be quite strange for Congress, in designating this agency, to have created the first independent financial regulator where during this transitional period, the president can take over the agency, as it were,” Gupta said.
Justice Department lawyer Hashim Mooppan countered that if Congress wanted Dodd-Frank to replace the federal vacancies law, it would have made that clear. Why wasn’t the “shall” language enough, Judge Patricia Millett asked. Mooppan replied that the succession section in Dodd-Frank coexisted with the federal vacancies law, and did not displace it.
Millett asked how Mulvaney’s situation didn’t run afoul of Dodd-Frank’s requirement that the CFPB director act independently of the OMB director.
"It seems ... to strain to suggest that Mr. Mulvaney would wake up and say, ‘I wish to do this as CFPB director — of course, as OMB director I think that’s a terrible horrible thing to do,'" Millett said.
Former bureau foe
Mulvaney wasn’t in Congress when Dodd-Frank became law in 2010. But he became a foe of the bureau after he joined the US House of Representatives in 2011, voting for budgets that would eliminate the bureau and cosponsoring legislation to that effect. At his confirmation hearing last year to lead the Office of Management and Budget, he stood by previous comments he’d made calling the bureau “a sick, sad” joke.
In his first month at the CFPB, Mulvaney rolled out over several changes, including announcing a review of a rule that had expanded the information lenders had to report about mortgage loan applications. In a move seen as symbolic of the bureau’s new focus, it announced that the Louis D. Brandeis Honors Attorney Program — named after the late US Supreme Court justice, who the National Law Journal noted had been a “pro-consumer” lawyer — was renamed the Joseph Story Honors Program. The bureau's press release described Story, also a former Supreme Court justice, as “a patriot dedicated to judicial restraint and the faithful application of the U.S. Constitution as written.”
In mid-January, the bureau announced it would reconsider a rule adopted last year that required payday lenders to take steps to verify that a consumer would be able to repay a loan, and held that it was “unfair and abusive” for lenders to try to directly withdraw money from a borrower’s account if two previous payment attempts had failed. The bureau also dropped a lawsuit filed during Cordray’s tenure against four payday lenders.
Democrats on Thursday railed against the review of the payday lending rule.
Virginia Sen. Mark Warner asked, “How would revoking the rule or changing it help consumers, particularly consumers who are living paycheck to paycheck?”
Mulvaney replied that he had the right to revisit the rules, but had “not arrived at any preconceived notions of outcomes.”
Mulvaney confirmed in his testimony Thursday that the bureau had not filed any new lawsuits seeking to enforce consumer protection laws since he took office. He resisted the idea that this meant he wasn’t enforcing the law, noting that the bureau was still pursuing approximately two dozen lawsuits from the Cordray era.
Massachusetts Sen. Elizabeth Warren, who was the chief architect of the bureau, laid into Mulvaney, listing enforcement actions the bureau had taken over the years against companies accused of scamming students, members of the military, and others. When Mulvaney responded that there were other agencies that also had the authority to take the action, Warren countered that they hadn’t done so.
“You know, in Congress you repeatedly tried to kill the consumer agency. Since you got to the agency, you have announced that you won’t use the exact enforcement tool that CFPB used to stop every single scam that I’ve mentioned today. You’ve taken obvious joy in talking about how the agency will help banks a lot more than it will help consumers and how upset this must make me,” Warren said. “You are hurting real people to score cheap political points.”