Consumer Law & Policy Blog

Report That English Seeking to Enjoin Mulvaney from Serving as Acting CFPB Director

by Jeff Sovern

Kate Berry has the story in the American Banker.  She reports that the case will be filed in federal court in Washington, D.C., possibly as early as this evening. The report states that one of English's anticipated theories is that Trump is attempting to assert control of an independent agency by naming as its leader someone who reports to him. English is also expected to argue that the Dodd-Frank Act takes precedence over the Vacancies Reform Act.

How the OLC Has Gone Astray on the CFPB

by Jeff Sovern

The Department of Justice's Office of Legal Counsel has now issued an opinion which, not surprisingly, expresses the view that the president can name the acting director of the CFPB. It argues that even though the VRA specifies that it is the "exclusive" way to fill vacancies "unless another statute 'expressly'  provides another mechanism for acting service," and such a statute exists here in the form of the Dodd-Frank Act, the VRA remains an alternative way to fill vacancies. It goes on to conclude that "when the President designates an individual under the [VRA] outside the ordinary course of succession, the President's designation necessarily controls.  Otherwise, the [VRA] would not remain available as an actual alternative in instances where the office-specific statute identifies an order of succession, contrary to Congress's actual intent."

But even assuming that the VRA provides an alternative way to fill the vacancy, there is a more plausible interpretation than the OLC's conclusion in the last quoted sentences above.  Suppose that the CFPB director had not appointed someone to serve as deputy director.  In fact, Director Cordray did not appoint a deputy director until his last day at the Bureau (he had named an acting deputy director, but imagine that he hadn't or that person had left the CFPB before the director did). In that case, the Dodd-Frank Act's succession plan would not have operated, and an alternate way for someone to become acting director would indeed be needed.  The VRA fills that gap.  Thus, the VRA would indeed, as the OLC wishes "remain available as an actual alternative in instances where the office-specific statute identifies an order of succession," and Congress's "actual intent" would not be frustrated.

The OLC's flawed interpretation would actually frustrate Congress's intent in enacting the Dodd-Frank Act succession provision. The OLC's opinion concedes that the Dodd-Frank Act's "reference to 'unavailability' is best read to refer both to a temporary unavailability . . . and to the Director's being unavailable because of a resignation . . . ."  In other words, the OLC agrees that the Dodd-Frank text provides that the deputy director is to serve as the acting director when the director resigns. But the OLC's interpretation of the Dodd-Frank Act succession provision would render that text mere surplusage. The VRA already provided that among the possible acting leaders of an agency is "the first assistant to the office of such officer," which for the CFPB translates into the Bureau's deputy director.  In that light, what would have been the point of saying so in the Dodd-Frank Act?  

As Adam Levitin has pointed out, Congress wanted the CFPB to be independent of the president; it would have wanted the president to have the power to name a leader of the CFPB without senatorial approval only as a last resort, not as a possible first resort. This interpretation accomplishes that goal. The OLC should revise its memo.

UPDATE: Marty Lederman at the Balkinization Blog has a useful post pulling together many of the arguments and responding to my claim above that the OLC's interpretation renders the Dodd-Frank provision redundant. He argues:

[T]he Dodd-Frank provision would still have at least two further functions:  (i) It would make her term indefinite, i.e., until a successor is confirmed, whereas the VRA designation is time-limited; and (ii) it also applies to cases where the Director remains in office but is otherwise "absent or unavailable," e.g., in the case of recusal or debilitating illness.

I don't think that solves the problem.  As for the first argument, about the time limits, the Dodd-Frank provision is not written in such a way as to suggest that eliminating the time limits is its goal. If that were its purpose, we would expect to see something stating that the time limits in the VRA don't apply to the deputy director serving as acting director, rather than a blanket statement that the deputy director serves as acting director. I'm not aware of anything that suggests the Dodd-Frank drafters were concerned about the time limits in the VRA, as opposed to simply insuring that the deputy director becoming acting director, nor can I think of a reason why the time limits would be a special issue for the CFPB, as contrasted with other administrative agencies. As to the second argument, yes, the Dodd-Frank provision applies if the director remains in office, but the OLC (correctly, in my view) found that the Dodd-Frank provision was also intended to govern when the director resigns. In that context, the OLC's interpretation would render the Dodd-Frank provision redundant, and it is that context that is relevant here.

 

Why the Industry Should Support English to Lead the CFPB

by Jeff Sovern

First, in case anyone who reads this blog doesn't already know, yesterday, CFPB Director Richard Cordray appointed CFPB chief of staff, Leandra English, to become CFPB deputy director. Section 1011(b)(5)(B) of the Dodd-Frank Act provides that the deputy director  shall "serve as acting Director in the absence or unavailability of the Director." Mr. Cordray then resigned, seemingly making Ms. English the acting director. But within hours, the White House proclaimed that it would appoint Office of Management and Budget Director Mick Mulvaney to run the agency, pending confirmation of an as-yet unnamed permanent director. The president presumably claims that authority under the Federal Vacancies Act.  But as Georgetown's Adam Levitin has demonstrated, Dodd-Frank's drafters rejected that idea. As Alan Kaplinsky and others have noted, the dueling claims will surely lead to litigation over which one is the director.

In the meantime, any action either purported leader takes on behalf of the CFPB will be subject to challenge by anyone who has standing, and perhaps set aside. That will undoubtedly affect the willingness of CFPB employees to act in a variety of ways, as well as those who are regulated by the CFPB. The result will be uncertainty for consumer financial businesses. 

We often hear that the industry is deeply troubled by uncertainty. Consequently, the industry should loathe this fight and should seek an early resolution.  If the industry supports Ms. English and presses the Trump administration to walk back its appointment of Mr. Mulvaney, the administration, facing a united front from both consumer advocates and the industry, will probably accept Ms. English as the acting head.  Uncertainty will dissipate.  In contrast, consumer advocates, who would surely prefer uncertainty to the appointment of a director who opposes the Bureau's mission and sees it as a a “joke . . . in a sick, sad way,” have no incentive to accede to the appointment of Mr. Mulvaney. In short, the industry should band together with consumer advocates and throw in the towel on this one. If they don't, it will give the lie to their claims of the problems with uncertainty.  

Politico Reports Two Other Candidates to Run the CFPB: Buckley & Strange

From Ben White's Morning Money Newsletter, here's the report on Buckley & Strange:

POLITICO’s Lorraine Woellert: “There’s no shortage of wannabes to fill Richard Cordray’s soon-to-be-vacant post at the CFPB. The latest names to circulate are Jerry Buckley of Buckley Sandler, an industry go-to for consumer finance law, and Alabama’s Luther Strange, the Senate short-timer who lost his GOP primary to Roy Moore.

“Strange would ‘make sense’ said one Senate staffer. He’s popular on both sides of the aisle and probably would be an easy confirmation. Plus, ‘he greatly values public service,’ the staffer said. Buckley and Strange didn’t respond to requests for comment.”

 

Homeland Security Inspector General Pegs Back Misuse of Importation Summons Authority

by Paul Alan Levy

Last spring, Twitter received a fair amount of attention for fighting a patently bogus attempt by the Department of Homeland Security to abuse its statutory authority to investigate the importation of goods as the basis for to issuing an administrative summons seeking to identify the owners of a Twitter account  hostile to the new leadership of the U.S. Citizenship and Immigration Service. Twitter sued to block the summons, and the government withdrew it, mooting the litigation.

In response to a senatorial inquiry, the responsible agency (Customs and Border Protection) apparently tried to hide behind the DHS Inspector General, implying that the summons related to an OIG investigation of whether CPB staff were undermining their new president. The DHS Inspector General publicly repudiated that move, noting archly that OIG carefully considers First Amendment ramifications ("we strive . . . to ensure that our work does not have a chilling effect on individuals’ free speech rights"), but saying that the office was reviewing the question whether CBP had misbehaved in issuing the summons.

Late last week, the DHS OIG released a report condemning the summons as being impermissible under the statute. The report indicates that, in retrospect, Customs and Border Protection admitted that its staff have been taking an overbroad view of how they can use the summons procedure, and agreed to issue a new manual, to institute a new review process, and to provide training to ensure that such abuses are not repeated.

Can Trump Appoint Mulvaney to Lead the CFPB Temporarily? Adam Levitin at Credit Slips & David Dayen at The Intercept Say No

by Jeff Sovern

Adam's piece is here while Dayen's is titled THERE’S A HITCH IN TRUMP’S PLAN TO STICK MICK MULVANEY ON THE CFPB: IT’S ILLEGAL.  Adam's argument is based on the legislative history and makes a lot of sense, though I suppose a strict textualist would not be persuaded by the use of legislative history. But the text of the statute also supports his interpretation. Under his approach, the deputy director would become acting director, as provided in § 1011(b)(5)(B) of the Dodd-Frank Act, which says that the deputy director shall "serve as acting Director in the absence or unavailability of the Director." Dayen, who refers to Adam's views on the matter, expresses concern that as Cordray has not appointed a deputy director but only named an acting deputy director, David Silberman, Trump could appoint a deputy director himself. I am skeptical of that claim as the Dodd-Frank Act, § 1011(b)(5)(A), says that the deputy director "shall--(A) be appointed by the Director" and obviously the president is not the director of the CFPB.  Dayen also discusses what might happen if Trump appointed Mulvaney or someone else anyway. I had previously expressed my opinion in an August 4 article in Bloomberg, Potential Successor to CFPB’s Cordray Unclear Under Dodd-Frank: “I’m not an expert on administrative law by any means, but surely an argument can be made that a director who resigns is both ‘absent’ and ‘unavailable,’ which means that the deputy director would automatically become acting director in light of the statutory text that the deputy director ‘shall serve as acting Director in the absence or unavailability of the Director.’" Adam links to a contrary view, based on the Federal Vacancies Act.

Ninth Circuit Rules Debt Collector Can't Evade FDCPA Liability by Acquiring the Lawsuit Against Itself

At least not through a writ of execution.  The case is here.  AccountRecovery.Net has a report on the case here.  Fellow blog co-coordinator Deepak Gupta argued the case. (HT: Gregory Gauthier).

Tobacco companies to begin "corrective" advertising

The major tobacco companies will soon "launch a court-ordered national advertising campaign to end a massive fraud and racketeering case that the federal government brought against the industry nearly two decades ago. The campaign will run on TV, in newspapers, online and on cigarette packaging," the online news outlet FairWarning reports.

The ads will be “corrective statements” to rectify what the trial judge called “false, deceptive, and misleading public statements about cigarettes and smoking,” and will mark the long-delayed conclusion to what was described as the largest civil racketeering case in U.S. history. In pursuing the tobacco industry, the Department of Justice accused cigarette makers of carrying out a half-century conspiracy to hook smokers while lying about the hazards and addictiveness of smoking. Following a nine-month trial, U.S. District Judge Gladys Kessler in 2006 issued an encyclopedic 1,683-page final opinion that chronicled decades of industry skullduggery.

The full article is here.

Politico: What's next for the CFPB's work on higher education issues

An article in Politico reviews the Consumer Financial Protection Bureau’s work on a range of on a wide range of issues relating to student loans and for-profit colleges, and discusses how the Trump Administration might undo that work. Read "What's next for the CFPB's work on higher education issues" here.

How the OCC Is Back to Protecting Banks Rather Than Consumers

Here, in the Times, by Ben Protess and Jessica Silver-Greenberg. Excerpt:

After the financial crisis in 2008, the Obama administration turned one of the banking industry’s friendliest regulators into one of its toughest. But that agency is now starting to look like its old self — and becoming a vital player in the Trump administration’s campaign to roll back regulations.

The regulator, the Office of the Comptroller of the Currency, which oversees the nation’s biggest banks, has made it easier for Wall Street to offer high-interest, payday-style loans. It has softened a policy for punishing banks suspected of discriminatory lending. And it has clashed with another federal regulator that pushed to give consumers greater power to sue financial institutions.

* * *

At a meeting with staff members over the summer, [interim head Keith Norieka] declared that the agency was returning to what he called its natural state, according to one of those who attended.