According to numerous media sources, the White House announced on Friday, June 16, that President Trump plans to nominate Kathy Kraninger as CFPB Director later this week.
The nomination means that pursuant to the Federal Vacancies Reform Act, Mick Mulvaney can continue to serve as Acting Director while Ms. Kraninger’s nomination is pending confirmation by the Senate and, as we explain below, potentially until mid-2020 if she is not confirmed. In the absence of a nomination by President Trump, the FVRA would not have allowed Mr. Mulvaney to continue to serve as Acting Director beyond June 22 and created the potential for his post-June 22 actions to be challenged as invalid. (The otherwise applicable FVRA time limit on service–210 days after the date the vacancy occurs—began to run on November 25, 2017, the date former Director Cordray’s resignation became effective.)
Ms. Kraninger is currently the Program Associate Director for General Government at the Office of Management and Budget. (In addition to serving as CFPB Acting Director, Mr. Mulvaney currently serves as OMB Director.) At OMB, Ms. Kraninger oversees budget development for several agencies, including DOJ, HUD, and Treasury. She has been at OMB since March 2017. She has also held positions with two Congressional committees, the House Committee on Homeland Security and the Senate Homeland Security and Governmental Affairs Committee, and has worked in two agencies, Treasury and Homeland Security. At Homeland Security, she served as Deputy Assistant Secretary for Policy Secretary Tom Ridge during the Bush Administration. Ms. Kraninger is a 2007 graduate of Georgetown University Law Center.
Ms. Kraninger’s nomination “resets the clock” on Mr. Mulvaney’s tenure as Acting Director under the FVRA. He can continue to serve as Acting Director until Ms. Kraninger’s nomination is withdrawn, rejected, or returned by the Senate. Senate rules provide that a nomination that has not been acted on by the end of the session in which it was submitted is returned to the President. (The current target date for the Senate’s adjournment is December 14.) Under the FVRA, the withdrawal, rejection, or return of Ms. Kraninger’s nomination would allow Mr. Mulvaney to continue to serve as Acting Director for an additional 210-day period. If a second nomination is made (which we assume would not happen before 2019), Mr. Mulvaney could continue to serve as Acting Director until the second nomination is confirmed, withdrawn, or rejected or returned by the Senate. If the second nomination is withdrawn or rejected or returned by the Senate at the end of the 2019 session, a further 210-day period would be triggered during which Mr. Mulvaney could continue to serve as Acting Director until approximately July 2020. (It appears that Mr. Mulvaney’s tenure as Acting Director could not be further extended by subsequent nominations.)
If confirmed as CFPB Director, Ms. Kraninger is expected to follow Mr. Mulvaney’s philosophy of not using the CFPB’s enforcement authority to “push the envelope” or to engage in “rulemaking by enforcement.” In addition, her nomination and potential confirmation is not expected to have any impact on the CFPB’s regulatory priorities outlined in its Spring 2018 rulemaking agenda of reopening rulemaking on the CFPB’s final payday/auto title/high-rate installment loan rule (Payday Rule) and proposing a debt collection rule dealing with third-party collectors. Most significantly, by eliminating a possible challenge to the validity of actions taken by Mr. Mulvaney as Acting Director after June 22, Ms. Kraninger’s nomination allows Mr. Mulvaney to move forward (hopefully expeditiously) on staying the Payday Rule’s compliance date pursuant to the Administrative Procedure Act’s notice-and-comment procedures. (Last week, a Texas federal court granted the stay of the lawsuit filed by two trade groups challenging the Payday Rule requested in a joint motion filed by the trade groups and the CFPB but denied the stay of the Payday Rule’s August 19, 2019 compliance date also requested in the joint motion.)
The continuing “wildcard” for Ms. Kraninger’s nomination and Mr. Mulvaney’s tenure as Acting Director is the possibility of a decision from the D.C. Circuit adverse to Mr. Mulvaney in Leandra English’s appeal challenging Mr. Mulvaney’s appointment as Acting Director. One possible outcome is that the D.C. Circuit could find that Ms. English is entitled to serve as Acting Director pursuant to the Dodd-Frank Act (DFA) provision that provides the Deputy Director shall serve as Acting Director in the Director’s “absence or unavailability” and that the DFA provision supersedes the President’s FVRA authority. It is unclear whether the DFA provision that only allows the President to remove the CFPB Director “for cause” would similarly limit the President’s removal of an Acting Director. (Mr. Mulvaney has asserted on various occasions that President Trump can remove him without cause.)
A second possible outcome is that the D.C. Circuit could find that Ms. English is not entitled to serve as Acting Director pursuant to the DFA because “absence or unavailability” does not include a vacancy created by a resignation and, although the President can use his FVRA authority to appoint an Acting Director, his appointment of Mr. Mulvaney is invalid because Mr. Mulvaney cannot simultaneously serve as OMB Director and CFPB Acting Director. The 210-day time limitation established by Section 3346(a)(1) of the FVRA on an acting officer’s tenure runs from “the date the vacancy occurs.” While a permanent officer’s nomination can extend the tenure of an existing acting officer beyond 210 days, it appears that the President cannot use the FVRA to appoint another person as acting officer after the 210-day period expires. Thus, assuming that after June 22 President Trump could not use the FVRA to appoint someone else to serve as Acting Director, the CFPB would remain without an Acting Director until a nominee is confirmed by the Senate. (Ms. English, unless removed by President Trump, would continue to serve as Deputy Director but could not exercise the authority of the Director. As noted above, while the DFA only allows the President to remove the CFPB Director “for cause,” it does not speak directly to the Deputy Director’s removal.)
It is important to also note that once a new Director appointed by President Trump is confirmed, he or she will be entitled to serve for a full five-year term regardless of how long Mr. Mulvaney has served as Acting Director. As a result, if Mr. Mulvaney were to serve as Acting Director for as long as possible (i.e. until mid-2020), even if a Democrat is elected President in 2020, a new Director appointed by President Trump and sworn-in in mid-2020 could potentially serve until mid-2025.
Such a possible scenario underscores the need for Congress to enact legislation to change the CFPB’s leadership structure to a five-member commission, something industry has previously urged lawmakers to do. While we are pleased with the direction in which Mr. Mulvaney has moved the CFPB, regardless of whether the President is a Republican or a Democratic, in our opinion, it is better policy and will provide more stability for the Bureau to be led by a group of people with diverse viewpoints rather than a single individual tied to the President’s political agenda.