If you get injured on the job, you take it up with the Occupational Safety and Health Administration. If a drug or food-product makes you sick, you take it up with the Food and Drug Administration. But until the launch of the Consumer Financial Protection Bureau in 2010, if you went bankrupt because someone sold you a fraudulent loan, it wasn’t really clear whom you’d reach out to.
That all changed thanks to the CFPB (and the Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the agency) but as of Monday, aggrieved consumers of financial products now find themselves back to square one, in a similarly uncertain position. Why? Blame a heated legal dispute that has left the CFPB with two officials both claiming to be in charge of the agency.
In a press conference Monday, President Donald Trump’s pick to be acting director — Office of Management and Budget Director Mick Mulvaney — criticized his adversary, CFPB’s Deputy Director Leandra English. He downplayed the importance of a restraining order brought by her, which claims the job is hers instead.
Mulvaney claimed English never showed up to work on Monday. “In the ordinary world if you don’t call, you don’t show, you don’t have a job the next day,” Mulvaney said at the conference. “We are going to follow the ordinary course of business.”
Yet English met with Democratic Sens. Elizabeth Warren (D-MA) and Chuck Schumer (D-NY) on Monday — and she has been sending out emails to staff using the title of “acting director,” as the New York Times’ Katie Rogers reported on Twitter. On Tuesday morning, English sent out a statement via her attorney Deepak Gupta, contradicting Mulvaney’s claim that she was a no-show.
“Yesterday, I spent time at the CFPB, I reviewed transition materials, and I met with members of Congress to lay out my plans for ensuring that the consumer bureau continues to fight for working families,” her statement, shared via email under the title “acting director,” reads. “Today, I plan on spending the day at CFPB headquarters.”
The CFPB website listed no director as late as 5:00 p.m. Eastern Monday, and the page where former director Richard Cordray’s bio once appeared was also left blank. As of 7:00 p.m. Eastern Monday, the website had been updated to reflect Mulvaney’s appointment.
In his press conference, Mulvaney also announced a temporary freeze on hiring and issuing new rules, similar to the freeze President Trump announced shortly after taking office. Mulvaney — who has insinuated in the past that he doesn’t think the CFPB should exist — addressed the fact that he had called the agency a “sick, sad” in a video that was recently republished by NBC.
Mulvaney then continued to assure the public of his control over the agency into Tuesday: In addition to updating the CFPB website, Mulvaney’s press team appeared to create a new Twitter account under the handle “CFPBDirector,” which shared pictures of Mulvaney working at his desk.
Reuters also reported that Mulvaney sent a second email to staff instructing them to “disregard” emails from English purporting to be acting director. A press representative for Mulvaney did not immediately respond to a request for comment about the Twitter account or the Reuters report.
What will happen to the CFPB?
While Mulvaney holds the reins for now, English may have a case in a situation with few legal precedents, said Adam Levitin, a law professor at Georgetown University who served on the CFPB’s consumer advisory board.
“No one knows what’s going to happen,” Levitin said. “The law that created the CFPB states very clearly that the deputy director succeeds the director until and unless there is a new Senate-confirmed director. The administration claims that a different law, the Federal Vacancies Reform Act, allows the president to put in place any person who has been confirmed by the Senate to any office.”
There are a few reasons why this particular succession battle is confusing. After the financial crisis, the Dodd-Frank Act established the CFPB and gave it a number of powers that are unique for government agencies. Its funding is drawn from the Federal Reserve’s profits, meaning it has limited congressional oversight. And it has an independent leadership structure that specifies the deputy director serves in the acting director’s stead — until the president appoints a replacement and that replacement is confirmed by the Senate.
But the CFPB actually didn’t have a deputy director until Friday, when then-CFPB Director Richard Cordray appointed Leandra English as the new deputy director. That theoretically should put her in charge until Trump can appoint a replacement who is confirmed by the Senate — where the GOP maintains a razor-thin margin. Yet, as a response on Friday, Trump announced his own pick: OMB’s Mulvaney.
“The law is clear: Director Mulvaney is the Acting Director of the CFPB,” said White House press secretary Sarah Sanders in a statement. “It is unfortunate that Mr. Cordray decided to put his political ambition above the interests of consumers with this stunt.”
But consumer advocates who back English’s appointment also think that the law is “clear,” and that judges will find in favor of English.
“The law is really clear here, the Vacancies Act is supposed to be a stop-gap — if there’s no legislative basis for replacing an agency director, you can use that,” said Amanda Werner of Americans for Financial Reform. “But Dodd-Frank very clearly states how the law works, so you can’t use the Vacancies Act to override it.”
That said, English’s case appeared to become more of a long shot late on Monday when the case in question drew a Trump-appointed judge. On Tuesday, Werner was joined by Sens. Elizabeth Warren (D-MA) and Jeff Jeff Merkley (D-OR) in a protest outside CFPB headquarters.
What could this mean for consumers?
Until a judge hears the case and issues a ruling, the agency’s future is uncertain, at best. Werner, who was a legal intern with the CFPB in 2013 and engaged in public awareness campaigns about its efforts, said officials at the agency were unsure of whom to report to as of Monday afternoon.
Most likely, Werner said, the agency will face a similar fate to the State Department, where key posts have gone unfilled, prompting accusations of institutional sabotage.
“This is definitely the way to slow down the administrative state, just like Steve Bannon pledged to do,” Werner said. “They’re trying to create this chaos.”
“The CFPB will wither,” said Levitin. “Having this kind of confusion is not good for any agency, but it’s not just the CFPB that’s affected by this. It impacts consumers and financial institutions.”
As Mic has previously reported, to date the CFPB has helped empower consumers seeking recourse through class-action lawsuits; has returned about $12 billion to consumers and victims of scams; has promoted financial literacy and maintained a database of consumer complaints — in the process revealing serious scandals, like Wells Fargo’s opening of sham bank accounts, as well as shady student loan servicers that misled borrowers. Cordray “has done amazing work,” said Carter Dougherty, communications director at Americans for Financial Reform in a previous interview. “It’s the first federal agency dedicated solely to looking after consumers.”
On the flip-side, critics of the CFPB say that the organization’s leadership crisis was a long time coming. In a blockbuster column for the right-leaning National Review, former CFPB official Ronald Rubin accused the agency of a litany of problematic practices, including preferential treatment for left-leaning candidates in job interviews and attempting to cover up harassment scandals brought by former employees, according to a Politico report.
“Democrats would love for the CFPB to be independent as long as everyone who works there is a Democrat,” Rubin said. “Once Mr. Mulvaney takes over, we’ll see how enthusiastically they defend the CFPB’s independence ... Depending upon how you view it, you can say it’s either independent or unaccountable. A dictatorship is independent, too.”
But John Campbell, a Harvard economist who’s written about the CFPB’s importance for Econofact, said the agency’s rule-making has been responsible and restrained.
In a phone interview, he called the Trump administration’s decision to replace the director without a Senate-confirmed appointment “tragic,” because it will hamstring the CFPB — meaning consumers could end up with financial products and services (like loans or “credit monitoring”) that haven’t been scrutinized by authorities. That’s dangerous, Campbell said.
“Consumer financial protection prevents the creation of a system in which some financially illiterate people get themselves into serious financial distress ... often the most vulnerable people,” Campbell said. “The problems that can develop take time to emerge, but if you have an agency that’s pretty obviously less active, it allows and encourages the emergence of financial products that really may be unsuitable for many people who buy them.”
Nov 28. 2017, 4:00 p.m. Eastern: This story has been updated.
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