Source: https://www.whitecase.com/publications/alert/cfpb-leadership-dispute-impacts-and-next-steps-update
Timestamp: 2018-08-15 01:53:52
Document Index: 191211514

Matched Legal Cases: ['§ 1404', '§ 5491', '§ 3349', '§ 2', '§ 1657', '§ 1812', '§ 1812', '§ 16', '§ 2', '§ 5491']

CFPB Leadership Dispute: Impacts and Next Steps – An Update | White & Case LLP International Law Firm, Global Law Practice
15 Jan 2018	Alert
1English v. Trump, No. 1:17-cv-02534-TJK (D.D.C. Nov. 26, 2017 ("English v. Trump"). For further details, please refer to our November 29, 2017, Client Alert, CFPB Leadership Dispute: Impacts and Next Steps.
2 English also filed an amended complaint on December 6, 2017, a topic for a forthcoming alert. The amended complaint seeks the same declaratory relief and references the new arguments made in her request for preliminary injunction. See page 2 supra.
3 Doc. No. 47.
4 Doc. No. 48.
5See Lower East Side People's Federal Credit Union v. Trump et al, No. 1:17-cv-09536 (S.D.N.Y. Dec. 5, 2017). Consumer finance scholars, lawmakers and organizations have also filed amicus briefs in support of the credit union. See Doc. No. 16; Doc. No. 19; Doc. No. 21; Doc. No. 22. An amicus brief in favor of Mulvaney was also filed. See Doc. No. 27. On December 22, 2017, the government moved to dismiss for lack of standing and raised similar arguments as in English v. Trump. See Doc. No. 31 (Motion to Dismiss) and Doc. No. 45 (Reply in Support of Motion to Dismiss); the credit union answered, arguing that Mulvaney’s decision to pause HMDA-related enforcement actions results in concrete harm to it. See Doc. No. 37. Oral arguments on the government's motion to dismiss were heard in New York on January 12. Briefings will close on January 24, 2018, and a ruling is expected thereafter. If not dismissed, this lawsuit could also be transferred to Judge Kelly under 28 U.S.C. § 1404 (providing for such transfers in the interest of judicial economy and efficiency).
6 English relied on Section 1011 of the Dodd-Frank Act, which she argues is the more recent and specific statute, and therefore, supersedes the Vacancies Act. In addition, English renewed her TRO argument that Mulvaney’s role is incompatible with the requirement that the CFPB be "an independent bureau" because, as member of the President’s cabinet, he is an at-will employee of the Administration, removable without cause by the President. See 12 U.S.C. § 5491(a).
7 Under 5 U.S.C. § 3349c(1), the President’s authority to use the Vacancies Act to fill vacancies does not apply to positions held by "any member who is appointed by the President, by and with the advice and consent of the Senate to any board, commission, or similar entity that—(A) is composed of multiple members; and (B) governs an independent establishment or Government corporation." See Doc. No. 25 at 16.
8 See Doc. No. 25 at 17–18. See also US Const. Art. II, § 2, Cl. 2. Under the Appointments Clause, the President has two means of appointing officers: with the advice and consent of the Senate, or pursuant to a statute. English argues that (1) Mulvaney’s Senate confirmation for the office of OMB Director does not extend to his appointment as CFPB Director, and (2) the absence of any clear statement in the Vacancies Act displacing Section 1011, mandatory succession provision precludes the President from relying on the Vacancies Act as a valid statutory basis to appoint the CFPB's Director.
9 Among the current and former Democratic Senators and Representatives who filed in support of English were Charles Schumer, Elizabeth Warren, Christopher Dodd, Barney Frank and Nancy Pelosi.
10 See Doc. No. 32; Doc. No. 34; Doc. No. 35.
11 Doc. No. 36.
12 See 28 U.S.C. § 1657(a) and D.C. USCS Ct App D.C. Cir. Rule 47.2(a) (providing for expedited appellate review when extraordinary circumstances so warrant, including cases concerning preliminary injunctions).
13 The government argued principally that Section 1011 only refers to the Director’s temporary "absence" or "unavailability," not a permanent "vacancy," and that both statutes should be read concurrently, as Section 1011 "supplements," rather than "supplants" the Vacancies Act. See Doc. No. 41 at 14, 19–20.
14 Doc. No. 41 at 14–17.
15 12 U.S.C. § 1812(a)(1)(B) ("The management of the Corporation shall be vested in a Board of Directors consisting of 5 members—(B) 1 of whom shall be the Director of the Consumer Financial Protection Bureau") and 12 U.S.C. § 1812(d)(2) ("In the event of a vacancy in the office of . . . Director of the Consumer Financial Protection Bureau and pending the appointment of a successor . . . the acting Director of the Consumer Financial Protection Bureau . . . shall be a member of the Board of Directors in the place of the . . . Director").
16 Doc. No. 41 at 12.
17 Id. at 30–31.
18 Id. at 32. See D.C. Code § 16-3501 (quo warranto). A quo warranto action provides for a civil action against any person who, within the District of Columbia, unlawfully performs the duties of a public officer. The Administration contends this is the "sole means" for English to bring an action against Mulvaney. In her reply, English argues that she has standing to collaterally challenge Mulvaney’s appointment, and is therefore not barred by the quo warranto statute. See Doc. No. 44 at 11–12. Judge Kelly did not need to reach this argument. See Doc. No. 47 at 39 fn 6.
19 Id. at 34. English claims this argument relies on a mistaken precedent, and also argues that the court does not lack the authority to enjoin Mulvaney. See Doc. No. 44 at 12–13.
20 See Doc. No. 38; Doc. No. 39; Doc. No. 40. Attorneys general of the states of Alabama, Arkansas, Arizona, Florida, Georgia, Kansas, Louisiana, Michigan, Nebraska, Oklahoma, South Carolina, Texas and West Virginia sided with the Administration.
21 See Doc. No. 38 at 12–14 (citing to PHH Corp. v. Consumer Fin. Prot. Bureau, 839 F.3d 1, 8 (D.C. Cir. 2016), reh’g en banc granted, order vacated 2017 U.S. App. LEXIS 2733, 2017 WL 631740 (Feb. 16, 2017) (referred to herein as the PHH case)); Doc. No. 39 at 14 (explaining that the Dodd-Frank Act already raises concerns as to the constitutionality of the CFPB’s structure because it insulates the Bureau’s Director "from presidential accountability to an unprecedented degree, by: (1) making the Director the sole head of the Bureau . . . ; (2) giving the Director a five-year term that will often span Presidential administrations; [and] (3) making the Director removable only for cause . . ." and ruling in English’s favor would only accentuate such concerns) (citations omitted).
22 Doc. No. 47 at 46.
23 Doc. No. 47 at 15 ("The Court concludes that a fair reading of the entirety of these statutes . . . does not result in an unavoidable conflict. Instead, the two statutes can, and therefore must, be read harmoniously."); Doc. No. 47 at 26 ("Moreover . . . it is not clear that Dodd-Frank is 'more specific' than the FVRA as applied to these facts . . . the FVRA explicitly applies where [an office requiring Presidential appointment and Senate confirmation] becomes ‘vacant’ because the officer ‘resigns,’ . . . the precise scenario at issue here.").
24 Id. at 12–13 ("Of course, this exception does not directly apply to the CFPB Director, because the CFPB is not a multi-member body.").
25 Id. at 36 (The "best reading is that the FVRA remains available to the President here").
26Id. at 15 ("The Court concludes that a fair reading of the entirety of these statutes . . . does not result in an unavoidable conflict. Instead, the two statutes can, and therefore must, be read harmoniously.").
27 US Const. Art. II, § 2, Cl 3 ("[…] [The President] shall take care that the Laws be faithfully executed […]").
28 Doc. No. 47 at 31 ("Under English interpretation, however, Cordray could have named anyone the CFPB's Deputy Director, and the President would be virtually powerless to replace that person upon ascension to acting Director—no matter how unqualified that person might be.").
29 See 12 U.S.C. § 5491(d) ("No Director or Deputy Director may hold any office, position, or employment in any Federal reserve bank, Federal home loan bank, covered person, or service provider during the period of service of such person as Director or Deputy Director.").
30 Doc. No. 47 at 2.
31 See Doc. No. 47 at 39–45. The Court did not need to reach the remaining balancing factors for a preliminary injunction.
32 Doc. No. 47 at 39 fn 6.
33 Doc. No. 48.
34 See D.C. USCS Ct App D.C. Cir. Rule 47.2(a).
35 C. Ryan Barber, "Federal Judge, For Second Time, Won't Yank Mulvaney From CFPB Director's Chair", The National Law Journal (Jan. 11, 2018), available at: https://www.law.com/nationallawjournal/sites/nationallawjournal/2018/01/10/federal-judge-for-second-time-wont-yank-mulvaney-from-cfpb-directors-chair.
36 Mark Moore, "Mulvaney Begins at CFPB With Immediate Freeze on Regulations", The New York Post (Nov. 27, 2017), available at: https://nypost.com/2017/11/27/mulvaney-begins-at-cfpb-with-immediate-freeze-on-regulations/. Mulvaney has also imposed a freeze on the Bureau’s collection of personally identifiable information (PII) until its data security system is upgraded. Mulvaney’s critics view this freeze as another attempt to hinder the CFPB’s supervisory functions, which rely on PII data collection to investigate consumer complaints and detect unlawful activity. See John Heltman, "Warren Grills CFPB Head Over Data Collection Freeze", American Banker (Jan. 8, 2018), available at: https://www.americanbanker.com/news/warren-grills-cfpb-head-over-data-collection-freeze; see also Letter from Senator E. Warren (D-MA) to Leandra English and Mick Mulvaney (Jan. 4, 2018), available at: https://www.americanbanker.com/news/warren-grills-cfpb-head-over-data-collection-freeze.
37 The new mission statement used in public documents by the CFPB now reads (emphasis added): "The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by regularly identifying and addressing outdated, unnecessary, or unduly burdensome regulations, by making rules more effective, by consistently enforcing federal consumer financial law, and by empowering consumers to take more control over their economic lives." See, e.g., CFPB Press Release, Report on the State of the Credit Card Market (Dec. 27, 2017), available at: https://www.consumerfinance.gov/about-us/newsroom/cfpb-releases-report-state-credit-card-market/. The original mission statement, however, still appears on the CFPB's website, in the About Us section.
38 Evan Weinberger, "CFPB Delays Prepaid Card Regulation's Effective Date", Law360 (Dec. 21, 2017), available at: https://www.law360.com/consumerprotection/articles/997622/cfpb-delays-prepaid-card-regulation-s-effective-date?nl_pk=bc8e924d-96a6-4626-8ece-3424b675c0be&utm_source=newsletter&utm_medium=email&utm_campaign=consumerprotection. The rule was originally scheduled to take effect in April 2018, and requires prepaid card issuers to provide consumers with credit-card like protections, such as strict fees disclosure, extended debt repayment delays, and limits on losses on unauthorized transactions. The CFPB announced it will postpone implementation until June 2018.
39 Evan Weinberger, "CFPB Plans To Reopen Mortgage Disclosure Rulemaking", Law360 (Dec. 21, 2017), available at: https://www.law360.com/consumerprotection/articles/997518/cfpb-plans-to-reopen-mortgage-disclosure-rulemaking?nl_pk=bc8e924d-96a6-4626-8ece-3424b675c0be&utm_source=newsletter&utm_medium=email&utm_campaign=consumerprotection. The 2015 HMDA rule increases the amount of borrower information that lenders must submit to regulators (e.g., loan interest rate, applicant's debt-to-income ratio). The CFPB intends to review the rule’s coverage by exempting certain types of transactions and re-evaluating reporting criteria. See also CFPB Public Statement, Statement with respect to HMDA implementation (Dec. 21, 2017), available at: http://files.consumerfinance.gov/f/documents/cfpb_statement-with-respect-to-hmda-implementation_122017.pdf.
40 Kate Berry, "CFPB's Mulvaney Survey for Debt Collection", American Banker (Dec. 19, 2017), available at: https://www.americanbanker.com/news/cfpbs-mulvaney-scraps-survey-for-debt-collection-plan.
41 See Renae Merle and Thomas Heath, "Even Before Court Victory, Trump’s Pick to Lead Consumer Watchdog Began Reshaping Agency", The Washington Post (Nov. 29, 2017), available at: https://www.washingtonpost.com/news/business/wp/2017/11/28/while-the-white-house-battles-for-control-heres-whats-at-stake-for-the-cfpb/?utm_term=.8716d2d4473f; Ian McKendry, "Mulvaney as CFPB Head? Five Things to Know", American Banker (Nov. 26, 2017), available at: https://www.americanbanker.com/slideshow/mulvaney-as-cfpb-head-five-things-to-know; Gregory Korte, "What Does Mulvaney’s Appointment Mean for the Future of CFPB", USA Today (Nov. 28, 2017), available at: https://www.usatoday.com/story/news/politics/2017/11/28/what-does-mulvaneys-appointment-mean-future-cfpb/901067001/; Evan Weinberger, "Mulvaney Says Pushing Him Out Would Slow Down CFPB", Law360 (Dec. 18, 2017), available at: https://www.law360.com/consumerprotection/articles/996063/mulvaney-says-pushing-him-out-would-slow-down-cfpb?nl_pk=bc8e924d-96a6-4626-8ece-3424b675c0be&utm_source=newsletter&utm_medium=email&utm_campaign=consumerprotection.
42 Kate Berry, "CFPB 2018 Outlook: More Deregulation, More Upheaval", American Banker (Jan. 2, 2018), available at: https://www.americanbanker.com/news/cfpb-2018-outlook-more-deregulation-more-upheaval.
43 Mulvaney has announced his plan to appoint new staff members who currently work in the Administration, including Eric Blankenstein (attorney with the Office of the US Trade Representative), John Czwartacki (OMB public relations), Emma Doyle (OMB chief of staff), James Galkowski (OMB special assistant), Sheila Greenwood (HUD official), as well as Brian Johnson (House Financial Services Committee staff member). Kirsten Sutton Mork (House Financial Services Committee staff director) has been appointed as new CFPB chief of staff. See Ryan Grim, "Mick Mulvaney Tells CFPB Staff He’s Bringing Six Trump Loyalists on Board", The Intercept (Dec. 21, 2017), available at: https://theintercept.com/2017/12/21/mick-mulvaney-cfpb-staff-trump-loyal... Kevin Wack, "Mulvaney's Plan to Embed Political Staffers in CFPB Sparks Backlash", American Banker (Dec. 5, 2017), available at: https://www.americanbanker.com/news/mulvaneys-plan-to-embed-political-staffers-in-cfpb-sparks-backlash; Evan Weinberger, "Hensarling Aide To Take Up CFPB Chief Of Staff", Law360 (Jan. 5, 2018), available at: https://www.law360.com/consumerprotection/articles/999318/hensarling-aide-to-take-up-cfpb-chief-of-staff-post?nl_pk=bc8e924d-96a6-4626-8ece-3424b675c0be&utm_source=newsletter&utm_medium=email&utm_campaign=consumerprotection.
44 See Kevin Wack, "Payday See New Opportunity at Revamped CFPB", American Banker (Dec. 08, 2017), available at: https://www.americanbanker.com/news/payday-lenders-see-new-opportunity-at-revamped-cfpb?tag=00000156-3312-d808-add7-bfff6c240000. The new payday loan rule sharply restricts lenders from issuing high-cost consumer loans of 45 days or less, taking effect in July 2019.
45 Doc. No. 48
46 See Purcell v. Gonzalez, 549 U.S. 1, 5 (2006) (per curiam); Jackson v. Culinary Sch., 59 F.3d 254, 256 (D.C. Cir. 1995) ("In the declaratory judgment context . . . appellate courts may review the district court's exercise of this 'wise judicial administration' only for abuse of discretion") (citation omitted).
47 See Nat’' Wildlife Fed'n v. Burford, 835 F.2d 305, 319 (D.C. Cir. 1987) ("We [the appellate court] owe the district court deference. We are most deferential to the court's balancing of the four injunction factors.").
48 See Neb. HHS v. United States HHS, 340 F. Supp. 2d 1, 21 (D.D.C. 2004).
49 Among potential candidates are House Financial Services Committee Chairman Jeb Hensarling (R-TX), ex-OCC Acting Comptroller Keith Noreika, and law professor Todd Zywicki. Recently, National Credit Union Administration Chairman J. Mark McWatters made the shortlist for next permanent CFPB Director. See Victoria Finkle, "Credit Union Regulator McWatters on Shortlist to Head CFPB", American Banker Dec. 28, 2017), available at: https://www.americanbanker.com/news/credit-union-regulator-mark-mcwatters-on-shortlist-to-head-cfpb .
50 Yuka Hayashi and Kate Davidson, "The Internal Divide Behind Trump’s Takeover of Consumer Watchdog", The Wall Street Journal (Dec. 21, 2017), available at: https://www.wsj.com/articles/the-divide-behind-trumps-cfpb-takeover-1513852201.
51 See note 21 supra. This ruling effectively set the precedent that federal agencies can either (1) be headed by a single director who answers to the president (executive agency) or (2) be headed by an independent regulatory commission which does not (independent agency). This ruling was appealed and is currently under review in the DC Circuit.
52Humphrey's Ex'r v. United States, 295 U.S. 602 (1935).
53 See, e.g., Doc. No. 3 at 8; Doc. No. 25 at 21.
54 Doc. No. 47 at 33 ("[T]he CFPB remains part of the Federal Reserve System. Its new Director, once appointed by the President and confirmed by the Senate, will have for-cause removal protections (subject to the outcome of pending litigation about the constitutionality of those protections.")) (citation omitted).