On December 22, 2017, the Department of Justice responded to the preliminary injunction motion (“PI motion”) filed by the Lower East Side People’s Credit Union (“People’s”) in its lawsuit challenging Mick Mulvaney’s appointment as CFPB Acting Director.  People’s lawsuit was filed in the U.S. District Court for the Southern District of New York after Leandra English, Cordray’s choice for CFPB Acting Director, filed her lawsuit in the U.S. District Court for the District of Columbia.

In its opposition brief, the DOJ not only opposed People’s PI motion but also moved to dismiss People’s lawsuit for lack of Article III standing.  People’s alleges that it has suffered injury because, as a CFPB-regulated entity, it faces “uncertainty” as to who is the lawful CFPB Acting Director.  In addition to arguing that People’s statements regarding uncertainty do not allege an injury in fact sufficient for Article III standing, the DOJ observed that People’s had not explained why such uncertainty should be attributed to Mr. Mulvaney rather than Ms. English.  The DOJ noted that the Credit Union National Association (CUNA) had also referenced the uncertainty resulting from confusion about the CFPB’s leadership in an amicus brief that supports Mr. Mulvaney.  (CUNA’s amicus brief was drafted by Ballard Spahr.)  Otherwise, the DOJ raised largely the same arguments that it raised in its opposition to Ms. English’s preliminary injunction motion.

Also on December 22, the U.S. Chamber of Commerce sought leave to file an amicus brief supporting the DOJ.  The Chamber’s proposed amicus brief raises the same arguments as the amicus brief it filed in Ms. English’s lawsuit.

The CFPB has launched a new online “Digital Check Tool” to be used by companies reporting HMDA data starting January 1, 2018.

More specifically, the new tool supports the Universal Loan Identifier (ULI) requirements of the revised HMDA rule.  The CFPB states on its website that the new tool can be used for two functions.  The first function is to generate a two-character check digit when a company enters a Legal Entity Identifier and loan or application ID.  The second function is to validate that a check digit is calculated correctly for any complete ULI a company enters.

The CFPB also made its rate spread calculator available for use with applications on which the final action occurred on or after January 1, 2018.

Democratic Senator Dianne Feinstein announced that she and three other Democratic Senators have introduced a bill, the “Accountability for Wall Street Executives Act of 2017,” that would allow state attorneys general to issue investigative subpoenas to national banks in connection with suspected violations of state law.

The bill appears intended to overturn the U.S. Supreme Court’s 2009 decision in Cuomo v. Clearing House Association interpreting the National Bank Act (NBA) provision that bars state officials from exercising “visitorial powers” over national banks.  While the Supreme Court held in Cuomo that the filing of a civil lawsuit by a state AG against a national bank to enforce state law was not barred as the exercise of “visitorial powers,” it also held that the issuance of extra-judicial subpoenas by a state AG in connection with an investigation was barred.

The bill would amend the NBA (12 U.S.C. 484) to provide that, notwithstanding the limit on visitorial powers, “an attorney general (or other chief law enforcement officer) of a State may issue subpoenas or administer oversight and examination to national banks or officers of national banks upon reasonable cause to believe that the national bank or an officer of a national bank has failed to comply with applicable State laws.”

In attempting to further empower state AGs, the bill likely is a response to the concern of Democratic lawmakers that CFPB enforcement activity will significantly decrease under the Trump administration.  A group of Democratic state AGs recently sent a letter to President Trump in which they threatened to aggressively use their enforcement authority under federal and state law.

In addition to various federal consumer protection statutes that give direct enforcement authority to state AGs or regulators, Section 1042 of the Consumer Financial Protection Act authorizes state AGs and regulators to bring civil actions to enforce the provisions of the CFPA, most notably its prohibition of unfair, deceptive or abusive acts or practices.  A state AG or regulator, before filing a lawsuit using his or her Section 1042 authority, must notify the CFPB and Section 1042 allows the CFPB to intervene as a party and remove an action filed in state court to federal court.

On January 11, 2018, from 12:00 p.m. to 1:00 p.m. ET, Ballard Spahr attorneys will hold a webinar: Who Will Fill the Void Left Behind by the CFPB?  Click here to register.

According to media reports, Mick Mulvaney, President Trump’s designee as CFPB Acting Director, has told CFPB staff that he plans to add six new staff members who currently work in the Trump administration.  The new staff members reportedly include:

  • John Czwartacki, who handles public relations for the Office of Management and Budget, the agency that Mr. Mulvaney leads, will handle public relations for the CFPB
  • Emma Doyle, Mr. Mulvaney’s OMB chief of staff
  • James Galkowski, a special assistant to Mr. Mulvaney at OMB
  • Eric Blankenstein, an attorney with the Office of the United States Trade Representative
  • Brian Johnson, a House Financial Services Committee staff member
  • Sheila Greenwood, a HUD official

The report indicates that Ms. Greenwood, Mr. Johnson, and Mr. Blankenstein will work at the CFPB on a full-time basis while the others will divide their time between the CFPB and OMB (as does Mr. Mulvaney).

In notices published in today’s Federal Register, the CFPB adjusted the thresholds of the asset-size exemptions for collecting HMDA data and establishing an escrow account for certain mortgage loans under TILA.

Pursuant to Regulation C, which implements HMDA, depository institutions with assets below an annually adjusted threshold are exempt from HMDA data collection requirements.  In its notice, the CFPB increased the 2017 threshold of $44 million to $45 million for 2018.  Thus, depository institutions with assets of $45 million or less as of  December 31, 2017 will be exempt from collecting HMDA data in 2018.  (An institution’s exemption from collecting data in 2018 does not affect its duty to report data it was required to collect in 2017.)

Regulation Z, which implements TILA, requires creditors to establish an escrow account to pay property taxes and insurance premiums for certain first-lien higher-priced mortgages.  The rule contains an exemption for creditors that operate predominantly in rural or underserved areas that meet certain other criteria, including an annually adjusted asset-size threshold.  In its notice, the CFPB increased the 2017 threshold from $2.069 billion to $2.112 billion for 2018.  Thus, loans made by creditors with assets of less than $2.112 billion on December 31, 2017 that operate predominantly in rural or underserved areas and meet the other exemption criteria will be exempt in 2018 from the TILA escrow account requirement for higher-priced mortgage loans.  The adjustment will increase the similar Regulation Z threshold for small-creditor portfolio and balloon-payment qualified mortgages.

The CFPB announced last Thursday that it expects to issue a final rule amending its final prepaid accounts rule “soon after the new year.”  In June 2017, the CFPB issued proposed amendments to the rule.

In its announcement, the CFPB also stated that, as part of that process, it expects to further extend the rule’s effective date.  The CFPB previously extended the rule’s initial October 1, 2017 effective date to April 1, 2018.  In the proposal, the CFPB sought comments on whether the  proposed amendments would make a further extension of the rule’s effective date necessary or appropriate.

The proposal included changes to two of the rule’s particularly controversial aspects: its error resolution and limited liability protections for unregistered accounts and its application to digital wallets.  It also included changes or clarifications regarding: the rule’s coverage of loyalty, award, and promotional gift cards; application of the Regulation E unsolicited issuance rules to certain prepaid cards; delivery of the long form disclosure under the retail location exception; provision of pre-acquisition disclosures; and submission of prepaid account agreements to the CFPB.

On December 22, 2017, the U.S. District Court for the District of Columbia held oral arguments on Leandra English’s preliminary injunction motion through which she seeks to block Mick Mulvaney from continuing to serve as the Acting Director of the CFPB. Judge Timothy Kelly presided over the hearing. Deepak Gupta argued for English. Acting Assistant Attorney General for the Justice Department’s Civil Division, Chad Readler argued for the Department of Justice.

At the beginning of the hearing, Judge Kelly announced that he had a list of questions for each side. He then used his questions to guide the hearing, giving each side an opportunity to answer before moving to his next question.

His questions generally cut straight to the heart of English’s and Mulvaney’s arguments, which we have discussed at length. The questions likely reflect his view on the decisive issues in the case. Judge Kelly bookended the hearing with questions about whether a preliminary injunction would throw the already embattled agency into chaos.

For example, his second question was whether and how a preliminary injunction would upset the status quo at the CFPB. He observed that injunctions exist to preserve the status quo while a case is litigated. Then he asked whether unseating Mulvaney would preserve the status quo given that Mulvaney is already leading the agency.

Gupta argued that, for reasons of equity, the status quo must be measured from the last “uncontested” state of affairs. Otherwise, Gupta argued, the court would reward usurpers. The last uncontested state of affairs as Gupta saw it was at midnight when English automatically became the Acting Director after Cordray’s resignation took effect.

The DOJ countered that English’s argument ignores some key facts, however. While English’s appointment took effect at midnight (according to her), Mulvaney’s appointment took effect a minute later at 12:01 am. That one-minute difference cannot reasonably be the deciding factor as to what counts as the status quo. This is especially so when the CFPB’s own general counsel stated that a Trump-appointed Acting Director would have a more legitimate claim to the office than English. Readler punctuated this argument by pointing-out that CFPB attorneys were seated with him at counsel table, not with English’s attorneys.

Towards the end of the hearing, when discussing the “balance of the equities” prong of the preliminary injunction analysis, Judge Kelly asked how a preliminary injunction would contribute to “clarity” about who was rightfully in charge of the CFPB. In response, Gupta generally repeated the status quo arguments he started-off with. Readler reminded the court that a preliminary injunction could result in the temporary appointment of a third leader of the agency in less than one month.

In the middle of the hearing, Judge Kelly’s questions touched on other significant weaknesses in English’s case. For example, English argues that language in Dodd-Frank allowing the CFPB Director to name a Deputy Director who “shall serve” as Acting Director is more specific than the Vacancies Reform Act (“VRA”) which allows the President to appoint acting officials. Thus, relying on the maxim of statutory construction that specific statutes trump general ones (i.e., the “general-specific” maxim), she argues that Dodd-Frank governs the appointment of the Acting CFPB Director. Through his questions, Judge Kelly highlighted that the “general-specific” maxim cannot be applied unless the VRA and Dodd-Frank are irreconcilable. The DOJ was quick to seize on the judge’s questions and point out that Dodd-Frank and the VRA are easily harmonized.

During the course of the argument, Gupta also confirmed that English takes the position that the Acting CFPB Director is removable only for cause just as the CFPB Director would be. Several amici have pointed-out the absurd results this creates, including the Credit Union National Association, which submitted an amicus brief drafted by Ballard Spahr. Judge Kelly followed-up by asking whether English’s removal-only-for-cause argument means that an unelected official can serve without Senate confirmation in the executive branch in opposition to the President. Gupta pointed to the Federal Housing Finance Agency (“FHFA”), which he said has analogous succession provisions. The DOJ responded: even if that were so, FHFA does not have nearly the power that the CFPB has wielded since its inception.

Also worth noting is the difficulty that English’s side had substantiating the irreparable harm element of her preliminary injunction claim. The DOJ argued that this was a run-of-the-mill employment case, in which irreparable harm is almost never found. Apparently rejecting that label, Judge Kelly nevertheless asked whether English could show any irreparable harm to herself that would flow from Mulvaney’ serving as Acting CFPB Director.

Gupta argued that English would be harmed by being deprived of the ability to exercise the powers of office. In doing so, he relied on a single district court case indicating that such harm could, indeed, be irreparable. Readler reminded the court that the case has never before been cited or relied upon by any court. He also distinguished the case and encouraged Judge Kelly to ignore it, saying that practically every case involving government employment involves some deprivation of the ability to exercise the powers of an office. If English were right, courts would have found irreparable harm in all of the run-of-the-mill employment cases, which they haven’t.

Judge Kelly wrapped-up the two-hour hearing by giving both sides an opportunity to raise any points not covered. He did not issue a decision or indicate when one could be expected. Based on the Judge’s denial of English’s request for a temporary restraining order and his questions and observations at the hearing, it seems likely that he will deny her preliminary injunction motion as well. English will likely appeal any such denial to the D.C. Circuit. 

Leandra English filed a response to the DOJ’s opposition to her motion for a preliminary injunction in her action seeking a declaration that she, rather than Mick Mulvaney, has the legal right to serve as CFPB Acting Director.

In our view, Ms. English has not advanced any persuasive new arguments in support of her claim. The hearing on her preliminary injunction motion is scheduled for 10 a.m. ET today.  A Ballard Spahr attorney will attend the hearing and provide a report to our blog readers.


The CFPB has announced that with regard to the collection in 2018 of the expanded data fields under the revised Home Mortgage Disclosure Act (HMDA) rules, the CFPB does not intend to require data resubmission unless data errors are material, and does not intend to assess penalties with respect to errors in the data collected in 2018.

As we reported previously, in October 2015 the CFPB adopted significant changes to the HMDA rules that significantly expanded the amount of information that must be collected and reported, and the institutions that are required to collect and report data. Most of the data collection changes are effective January 1, 2018. In announcing the approach to enforcement, the CFPB acknowledged the significant systems and operational challenges faced by the industry in implementing the changes.

The CFPB also noted that any examinations of 2018 HMDA data will be diagnostic to help institutions identify compliance weaknesses, and indicated that it will credit good faith compliance efforts. This approach was expected by the industry, as it is consistent with the approach taken by the CFPB with the implementation of other significant mortgage rules. The FDIC and OCC also issued similar statements.

Significantly, the CFPB also announced that it intends to engage in a rulemaking to reconsider various aspects of the revised HMDA rules, such as the institutions that are subject to the rules, including the related transactional coverage tests, and the discretionary data points that were added to the statutory data points by the CFPB.  While the industry has pressed for a reconsideration of various requirements, and the Trump administration has signaled it was receptive to considering changes, this is the first public announcement by the CFPB that it will reconsider the revisions made to the HMDA rules.

Three amicus briefs have been filed in support of President Trump and Mick Mulvaney, who are opposing the motion for a preliminary injunction filed by Leandra English in her action in D.C. federal district court seeking a declaration that she, rather than Mr. Mulvaney, has the legal right to serve as CFPB Acting Director.

The three amicus briefs were filed by the following amici:

  • Credit Union National Association.  CUNA is the largest organization representing the nation’s 6,000 credit unions.  (CUNA’s amicus brief was authored by Ballard Spahr.)
  • Chamber of Commerce.  The Chamber represents 300,000 direct members and indirectly represents the interests of more than 3 million companies and professional organizations.
  • Republican State Attorneys General.  Amici are the attorneys general of the following 13 states: Texas, West Virginia, Alabama, Arizona, Arkansas, Florida, Georgia, Kansas, Louisiana, Michigan, Nebraska, Oklahoma, and South Carolina.  (Eight of these AGs filed an amicus brief in support of President Trump and Mick Mulvaney and opposing Ms. English’s request for a temporary restraining order.)

In its opposition to Ms. English’s preliminary injunction motion, the DOJ relies primarily on the argument that the provision in the Consumer Financial Protection Act (CFPA) that provides the CFPB Deputy Director “shall…serve as acting Director in the absence or unavailability of the Director” does not override the President’s authority under the Federal Vacancies Reform Act (FVRA) to temporarily fill a vacancy in an executive agency position requiring confirmation.  All three amici agree with the DOJ’s position that the President’s designation of Mr. Mulvaney as Acting Director was entirely proper under the FVRA.  They argue that Ms. English’s position, which would deny the President the ability to designate a CFPB Acting Director under the FVRA, raises serious constitutional issues by limiting the President’s executive authority.  Citing U.S. Supreme Court case law indicating that preference should be given to a statutory interpretation that avoids a constitutional issue, the amici contend that the D.C. court should rule in favor of President Trump and Mr. Mulvaney to avoid such constitutional issues.

In its amicus brief, CUNA argues further that the phrase “absence or unavailability” in the CFPA provision does not cover a vacancy created by the CFPB Director’s resignation.  For the reasons set forth in its brief, CUNA argues such language is more properly read to cover a temporary situation, such as an accident requiring the Director’s long term hospitalization, and not a permanent departure from office.   (The Chamber makes similar arguments in its amicus brief.)

In addition to raising constitutional issues by placing limits on the President’s executive authority, CUNA argues that Ms. English’s position raises substantial questions under the Appointments Clause.  First, it raises the question whether the Deputy Director/Acting Director is an “inferior officer” or instead a “principal officer” who may only be appointed by the President with the Senate’s consent.  In their amicus brief, the Republican State AGs argue that the powers wielded by a CFPB Acting Director are “on par with that of a principal officer who can be nominated and appointed only by the President.”

Second, if the Deputy Director/Acting Director is an “inferior officer,” Ms. English’s position raises the question whether the CFPB is a “department” whose head may constitutionally appoint inferior officers.  In its amicus brief, the Chamber argues that the CFPB does not qualify as a “department” for purposes of the Appointments Clause because (1) Congress described the CFPB as a “bureau” in the Dodd-Frank Act and did not designate the CFPB as an executive, Cabinet-level department, and (2) the CFPB is contained in the Federal Reserve and does not exist as  a freestanding component of the Executive Branch.

The Chamber also argues that because former Director Cordray was unconstitutionally insulated from Presidential control when he appointed Ms. English as Deputy Director, his appointment of Ms. English as Deputy Director was invalid.  The Chamber cites to the decision of a panel of the D.C. Circuit in PHH v. CFPB which held that limiting the President to for-cause removal of the CFPB Director was unconstitutional.