Trump, Dems in row over who is running the CFPB

There is confusion at the Consumer Financial Protection Bureau about who exactly is running the agency.

On Friday, Obama-appointed director Richard Cordray resigned. Cordray was the first director of the CFPB, which means the bureau's succession rules had never come into play.

The CFPB is a creature of the Dodd-Frank financial reform bill, passed in 2010. Language in the law suggests that when a director resigns, his deputy becomes acting director. In this case, Cordray's deputy, Leandra English, took the reins.

But the Trump administration says that the president has the right to name the acting director. Accordingly, Trump appointed his budget chief, Mick Mulvaney to the post.

The confusion is not likely to be sorted out any time soon.


On Saturday, Trump tweeted that the CFPB - which has imposed steep penalties on banks, auto dealers, student lenders and credit card companies for predatory lending practices - had “devastated” financial institutions.

Democrats and Republicans agree that Trump may nominate a permanent CFPB chief, but they disagree over who may lead the agency in the interim, a dispute which could drag on for months until the Senate confirms a permanent Trump appointment.

The dispute is over which federal law prevails in naming an interim director. According to Democrats, the relevant law is the 2010 Dodd-Frank Wall Street reform law that created the CFPB, which stipulates that the agency’s deputy director is to take over in the short term.

Cordray, in announcing his resignation on Friday, said he had named English as deputy director and that she would become the acting director.

But administration officials say the 1998 Federal Vacancies Reform Act gives the president the power to temporarily fill agency positions, except for those with multi-member boards - an exemption they said did not apply to the CFPB.

Part of the confusion stems from the status of the CFPB as an independent government agency. There are several court challenges underway to that designation, which should give Trump the power to name an interim replacement.

On Saturday evening, the Justice Department said in a memo that the White House was right to name a new CFPB director.

The Dodd-Frank language about changing CFPB directors is “unusual” but the White House may name an interim chief, according to the memo.

Such advice from the Justice Department is open to legal challenge.

Alan Kaplinsky, head of the Consumer Financial Services Group for law firm Ballard Spahr LLP, said the issue will likely have to be decided in the courts. In the meantime, he said, “This enormous cloud of uncertainty” will hang over the CFPB.

Kaplinsky said he believes that Dodd-Frank provides for the deputy director to take charge during the short-term, but Congress did not explicitly list the resignation of the director as a situation where the deputy would step up.

“I think Trump wins, but unfortunately it is going to take a while,” Kaplinsky said.

It should be an interesting Monday at the CFPB.


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