The issue of the CFPB’s constitutionality is currently before the Fifth Circuit in the interlocutory appeal of All American Check Cashing from the district court’s ruling upholding the CFPB’s constitutionality.  As a result, the Fifth Circuit’s decision issued earlier this week which found that the Federal Housing Finance Agency (FHFA) is unconstitutionally structured because it is excessively insulated from Executive Branch oversight could be a preview of how another Fifth Circuit panel might approach the CFPB’s constitutionality.

In addition, the decision will likely influence the approach that the CFPB takes in its brief in All American Check Cashing’s appeal.  All American Check Cashing has already filed its principal brief and the CFPB is seeking a 40-day extension of the date by which it must file its brief (from August 1 to September 10).  In its motion to extend the briefing schedule, the CFPB states that the Fifth Circuit’s opinion “discussed features of the Bureau and compared them to aspects of FHFA’s structure” and thus “many of the arguments discussed by the Court are relevant to the issues in [the All American Check Cashing] case.”  The CFPB is requesting the extension “so that it may evaluate the [Fifth Circuit’s] opinion, and to decide how to address that opinion in the context of the [the All American Check Cashing] case.”  (The motion indicates that All American Check Cashing has no objection to the extension provided it receives a one-week extension for filing its reply brief.)

The FHFA was created by the Housing and Economic Recovery Act of 2008 (HERA) to oversee two of the housing government services enterprises (GSEs).  Like the CFPB, the FHFA was established as an “independent agency” led by a single Director appointed by the President subject to Senate confirmation for a five-year term and who can only be removed by the President “for cause.”  Also like the CFPB, the FHFA is not funded through the regular appropriations process.  Instead, the FHFA is funded through assessments collected from the GSEs.  The FHFA is overseen by the Federal Housing Finance Oversight Board (Board) which is required to testify annually before Congress about the FHFA’s performance and the safety and soundness of the GSEs but cannot exercise any executive authority, or as put succinctly by the Fifth Circuit, “cannot require the FHFA or Director to do much of anything.”

The parties challenging the FHFA’s constitutionality were shareholders of the GSEs who were seeking to invalidate an amendment (Third Amendment) to a preferred stock agreement between the Treasury Department and the FHFA as conservator for the GSEs that required the GSEs to pay quarterly dividends to the Treasury equal to the GSEs’ excess net worth after accounting for prescribed capital reserves.

The Fifth Circuit determined that while the “for cause” removal provision alone was not sufficient to trigger a separation of powers violation, it did trigger a violation when combined with other features of the FHFA, specifically its insulation from the normal appropriations process and the absence of any statutory provision providing for executive branch control over the FHFA’s activities.  The court observed that while two of the Board’s members are Cabinet officials, the Board exercises purely advisory functions.  It determined that the appropriate remedy for the constitutional violation was to sever the for-cause removal provision while “leav[ing] intact the remainder of HERA and the FHFA’s past actions—including the Third Amendment.”

In ruling that the FHFA is unconstitutionally structured, the Fifth Circuit stated that it was “mindful” of the D.C. Circuit’s en banc PHH decision finding the CFPB’s structure to be constitutional but “salient distinctions between the agencies compel a contrary conclusion.”  It observed that, unlike the Board, the Financial Stability Oversight Council (FSOC) can directly control the CFPB’s actions because it holds veto-power over the CFPB’s policies.  The court also commented that the shareholders were not only challenging the for cause removal provision but were challenging the “cumulative effect of Congress’s agency-design decisions.”  (emphasis included)

In its interlocutory appeal to the Fifth Circuit, All American Check Cashing has argued that not only does the CFPB’s single-director-removable-only-for-cause structure, standing alone, make the CFPB’s structure unconstitutional, but that its other features “render it even more clearly unconstitutional when combined with its single unaccountable Director.”  Such other features include the CFPB’s insulation from the regular appropriations process.  As a result, the Fifth Circuit could rely on All American Check Cashing’s “cumulative effect” argument as a basis for disagreeing with the D.C. Circuit’s en banc conclusion in PHH.  Indeed, perhaps with All American Check Cashing’s interlocutory appeal in mind, the Fifth Circuit specifically indicated that its decision was limited to the FHFA’s constitutionality.  The court stated in a footnote:

We do not question Congress’s authority to establish independent agencies, nor do we decide the validity of any agency other than the FHFA….
We leave for another day the question of whether other agencies suffer from similar constitutional infirmities.

Despite the Fifth Circuit’s reliance on the FSOC’s oversight of the CFPB to distinguish the D.C. Circuit’s en banc PHH decision, we are not convinced that the FSOC’s oversight of the CFPB is significantly different from the Board’s oversight of the FHFA.  While the FSOC can veto a CFPB regulation, it can only do so within a short time period by a two-thirds vote and only for reasons of safety and soundness (a very high standard) and not because FSOC members believe the regulation is bad policy.  Indeed, to date the FSOC has not vetoed any CFPB regulation nor has any FSOC member filed a petition to initiate a potential veto vote.  Furthermore, except for its ability to veto a CFPB regulation for safety and soundness reasons, the FSOC has no oversight over CFPB supervisory and enforcement activities.  The FSOC did not consider a veto of the CFPB’s arbitration rule even though the then Acting Comptroller of the Currency took the position that the rule threatened the safety and soundness of the banking system because of the avalanche of class action litigation that the CFPB predicted would result from the rule.  The only check on the CFPB proved to be Congress’ use of the Congressional Review Act to override the arbitration rule.

Should the Fifth Circuit conclude that the CFPB’s structure is unconstitutional, its FHFA decision also suggests that it would rule that the proper remedy is to sever the Consumer Financial Protection Act’s (CFPA) for-cause removal provision.  All American Check Cashing is arguing that the correct remedy is to strike down the CFPA as a whole.

Both the FHFA and the Treasury Department, in their briefs to the Fifth Circuit, sought to avoid the constitutionality issue by arguing that the Third Amendment was entered into by the FHFA’s Acting Director who was removable by the President at will and therefore the shareholders’ harm was not traceable to the for-cause removal restriction.  The FHFA and Treasury Department argued that because HERA, by its plain terms, only restricted the President’s authority to remove the Director but did not restrict the President’s authority to remove an Acting Director, the Acting Director was not subject to the for-cause removal restriction.  The Fifth Circuit rejected this argument stating:

But if the acting Director could be removed at will, the FHFA would be an executive agency—not an independent agency.  There is no indication that Congress sought to revoke the FHFA’s status as an independent agency when it is led by an acting, rather than appointed, Director.  So an acting Director, like an appointed one, is covered by the removal restriction. (footnotes omitted).

The FHFA also argued in the alternative that the FHFA’s structure was constitutional.  In its brief, the FHFA observed that the shareholders were relying on the D.C. Circuit’s vacated panel decision in PHH in arguing that the FHFA’s structure is unconstitutional.  The FHFA stated that “the District Court did not err by agreeing with every other court that has considered the issue that “the reasoning of the panel decision in PHH Corp. [is] unpersuasive even if it had not been vacated.'”

In a supplemental filing, the FHFA notified the Fifth Circuit of the D.C. Circuit’s issuance of its en banc PHH decision rejecting the constitutional challenge to the CFPB’s structure and indicated that the D.C. Circuit’s reasoning closely tracked the FHFA’s arguments in support of its constitutionality.  In addition to defending its constitutionality, the FHFA took the position that if its structure were found to be unconstitutional, the proper remedy would be to strike the for-cause removal provision.

The Fifth Circuit’s rejection of the argument made by the FHFA and the Treasury Department that the shareholders’ constitutionality challenge failed because the Acting Director was removable at will can be expected to influence whether the CFPB will make a similar argument in the All American Check Cashing case.  In opposing All American Check Cashing’s petition to the Fifth Circuit asking it to grant interlocutory review, the CFPB did not directly address the merits of the appellants’ constitutional challenge.  Instead, it claimed that because Acting Director Mulvaney is removable at will by the President and had ratified the CFPB’s decision to bring the lawsuit, any constitutional defect that may have existed with the CFPB’s initiation of the lawsuit was cured and the constitutionality of the for-cause removal provision was no longer relevant to the case.

According to the CFPB, Acting Director Mulvaney is removable at will by the President because the CFPA’s removal provision by its plain terms applies only to “the Director.”  Another Fifth Circuit panel could easily apply the rationale used by the Fifth Circuit in rejecting the FHA’s and Treasury Department’s “plain terms” argument and conclude that the CFPB’s Acting Director also is not removable at will because “there is no indication that Congress sought to revoke the [CFPB’s] status as an independent agency when it is led by an acting, rather than appointed, Director.”

It remains unclear what position the CFPB will take on its constitutionality in the All American Check Cashing case.  However, given that another Fifth Circuit panel now has the Fifth Circuit’s FHFA decision on which it can readily rely to reject an argument by the CFPB that the Acting Director’s ratification makes a ruling on the CFPB’s constitutionality unnecessary, there is now a greater likelihood that the Fifth Circuit will issue a decision that does rule on the CFPB’s  constitutionality.  (In the CFPB’s lawsuit against RD Legal Funding, Judge Preska of the Southern District of New York recently ruled that the CFPB’s single-director-removable-only-for-cause structure is unconstitutional and struck the CFPA (Title X of Dodd-Frank) in its entirety.  The CFPB has not yet indicated whether it plans to appeal Judge Preska’s decision.)

Should any of the parties to the FHFA decision wish to seek a rehearing en banc, they must do so within 45 days after entry of judgment.  The 45-day period applies when one of the parties is a United States agency (here, the FHFA and the Treasury Department) or a current United States officer or employee sued in an official capacity (here, FHFA Director Watt and Treasury Secretary Mnuchin).



The CFPB will be one of the members of the new Task Force on Market Integrity and Consumer Fraud (Task Force) to be established by the U.S. Department of Justice (DOJ).  Last week, the DOJ announced that it was disbanding the Financial Fraud Enforcement Task Force, established under the Obama Administration, and pursuant to an Executive Order issued by President Trump, plans to establish the Task Force in its place.

The purpose of the Task Force, according to the DOJ press release, is to deter fraud on consumers, especially veterans and the elderly, and the government, specifically as it relates to health care.  The Task Force will provide guidance both for the investigation and prosecution of specific fraud cases and provide recommendations “on fraud enforcement initiatives.”

Although the DOJ will lead the Task Force, the Executive Order directs him to include several other federal agencies, including the CFPB.  Acting Director Mulvaney, who joined Deputy AG Rod Rosenstein in the formal announcement of the Task Force, stated that  “[i]nteragency cooperation is incredibly important to these complex issues” and favorably cited the “growing cooperation” among the DOJ and other federal and state agencies.

The Task Force’s focus on consumer fraud is consistent with Acting Director Mulvaney’s statements that the CFPB will no longer use its enforcement authority to “push the envelope” and instead will use it to target violations that present “quantifiable and unavoidable harm to the consumer.”  It is also consistent with his previous statements identifying the prevention of elder financial abuse as a priority issue for the CFPB.  In his remarks at the formal announcement of the Task Force, Acting Director Mulvaney highlighted the CFPB’s initiatives to address elder financial exploitation.

CFPB Acting Director Mick Mulvaney announced yesterday that he has selected Brian Johnson, who currently serves as CFPB Principal Policy Director, to serve as Acting Deputy Director.  Before joining the CFPB, Mr. Johnson served as a House Financial Services Committee staff member.

Mr. Johnson’s selection as Acting Deputy Director follows the announcement by Leandra English this past Friday that, in light of President Trump’s nomination of Kathy Kraninger to serve as CFPB Director, she would resign as Deputy Director this week and drop her lawsuit challenging Mr. Mulvaney’s appointment as Acting Director.

Leandra English, who was appointed CFPB Deputy Director by former Director Cordray before his November 2017 resignation, announced today that she will resign as Deputy Director early next week.  Ms. English indicated that her resignation was prompted by President Trump’s recent nomination of Kathy Kraninger to serve as CFPB Director.

Ms. English’s announcement was accompanied by a statement from her attorney indicating that he will be filing papers on Monday to terminate her lawsuit against President Trump and Acting Director Mulvaney which is now pending before the D.C. Circuit Court of Appeals.  The District Court had previously held that Mr. Mulvaney is the lawful Acting Director.

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.


The CFPB has published a post blog indicating that it plans to reconstitute three of its advisory groups: the Consumer Advisory Board (CAB), the Community Bank Advisory Council (CBAC), and the Credit Union Advisory Council (CUAC).

The blog post’s publication followed an eruption of controversy over the CFPB’s cancellation of a CAB meeting scheduled for today and tomorrow as well as media reports that the blog post’s author, Anthony Welcher, CFPB Policy Associate Director for External Affairs, had informed CAB members in a conference call today that their terms were terminated and they were not permitted to reapply for membership.  (CAB members have generally been appointed for a 3-year term.)

The series of RFIs issued by the CFPB included an RFI seeking comment on its public and non-public external engagements, including meetings of the CFPB’s advisory groups.  Comments on the RFI were due by May 29, 2018.  In its blog post, the CFPB states that “this week the Bureau begins the process of transforming the Bureau’s Stakeholder Outreach and Engagement work, which includes transitioning from former modes of outreach to a new strategy to increase high quality feedback.”  It also states that the comments it received in response to the RFI “informed our shift to expand external engagements and modify our Advisory Board and Councils to be one focused tool in the evaluative process.”

Section 1014 of Dodd-Frank required the CFPB to establish the CAB and provides that the CAB “shall meet from time to time at the call of the Director, but, at a minimum, shall meet at least twice in each year.”  Dodd-Frank did not require the CFPB to establish either the CBAC or CUAC.  Both Councils were established by the CFPB in the exercise of the Director’s discretion pursuant to his executive and administrative authority under Dodd-Frank Section 1012.

The CFPB’s blog post states that it “will continue to fulfill its statutory obligations to convene the [CAB] and will continue to provide forums for the [CBAC] and the [CUAC].”  It further states that the Bureau “will continue these advisory groups and will use the current 2018 application and selection process to reconstitute the current advisory groups with new, smaller memberships.”  (The CFPB’s statement that it plans to reconstitute all three groups indicates that it has also terminated or plans to terminate the terms of current CBAC and CUAC members.)

The blog post further indicates that the CFPB plans to “increase its strategic outreach to encourage in-depth conversations, sharing information, and developing partnerships focused on consumers in underserved communities and geographies. These engagements will include regional town halls, roundtable discussions at the Bureau’s headquarters with consumer finance experts and representatives, regional roundtables, and regular national calls.”  In the blog post, the CFPB announces that on June 8, 2018, in Topeka, Kansas, the CFPB will co-host a town hall, “Fighting Elder Financial Exploitation in your Community,” with the Kansas Attorney General, to “recognize effective state and local efforts addressing elder exploitation generally and elder financial exploitation.”

The CFPB’s cancellation of the CAB meeting that was scheduled for today and tomorrow provoked criticism from CAB members.  The CFPB had previously cancelled the CAB’s February 2018 scheduled meeting.  In a letter to Acting Director Mulvaney signed by the CAB’s Chair and Vice Chair as well as 13 of the CAB’s 23 other members, CAB members stated that the cancellation “raises significant issues regarding compliance with legal obligations related to the CAB and CAB service.”  They cited to Dodd-Frank Section 1014(a) which requires the CAB to convene twice a year to “advise and consult with the Bureau in the exercise of its functions under the Federal consumer financial laws and to provide information on emerging practices in the consumer financial products and services industry, including regional trends, concerns and other relevant information.”  Calling the cancellation “a troubling sign,” the members state that they “are extremely concerned that our collective input is not valued.”

In a letter responding to the members’ letter, Mr. Mulvaney stated that he “can assure [them] that there is no cause for concern” and that the CAB “will meet at my call (or at the call of a newly confirmed Director) at least twice this calendar year, in fulfillment of the Bureau’s legal obligations.”  Under former Director Cordray, the CAB held three meetings each year.  As noted above, Section 1014 of Dodd-Frank requires only two CAB meetings per year.  Acting Director Mulvaney’s response is consistent  with his general practice of adhering to what Dodd-Frank requires rather than following the expansive approach to the CFPB’s exercise of its authorities that prevailed under former Director Cordray.



The end of the 210-day period during which Mick Mulvaney can serve as CFPB Acting Director under the Federal Vacancies Reform Act (FVRA) in the absence of President Trump’s nomination of a permanent Director is drawing dangerously closer.  Former Director Cordray’s resignation became effective at midnight on November 24, 2017, thereby making November 25 the first day on which the position of CFPB Director was vacant.  President Trump’s appointment of Mick Mulvaney as CFPB Acting Director also became effective on November 25 upon Mr. Cordray’s resignation.  Accordingly, including today, the position of CFPB Director will have been vacant for 194 days, making June 22 the last day of the 210-day period.

FVRA Section 3346(a)  provides:

Except in the case of a vacancy caused by sickness, the person serving as an acting officer as described under section 3345 may serve in the office—(1)  for no longer than 210 days beginning on the date the vacancy occurs; or (2) subject to subsection (b) [which addresses a rejected, withdrawn or returned nomination], once a first or second nomination for the office is submitted to the Senate, from the date of such nomination for the period that the nomination is pending in the Senate.

As an initial matter, it appears that President Trump could not use the FVRA to appoint another Acting Director once the 210-day period has expired.  According to a Congressional Research Service report, because the 210-day time limitation established by Section 3346(a)(1) runs from “the date the vacancy occurs,” the limitation is tied to the vacancy itself, rather than to any person serving in the office.

The absence of a nominee for permanent Director by June 22 could be problematic in several respects.  First, the expiration of the 210-day period could strengthen Leandra English’s claim that she is entitled to be the Acting Director under the Dodd-Frank Act (DFA) provision that provides that the Deputy Director shall serve as Acting Director in the Director’s “absence or unavailability.”

At the April 12 oral argument in the D.C. Circuit on Ms. English’s appeal from the district court’s denial of her preliminary injunction motion, the DOJ indicated that it did not dispute Ms. English’s position that “absence or unavailability” includes a vacancy created by a resignation.  In asserting that Mr. Mulvaney is the rightful Acting Director, the DOJ has relied on the argument that the President can use his FVRA authority as an alternative to the DFA provision.  Since it appears the President could not use the FVRA to replace Mr. Mulvaney as Acting Director after the 210-day period expires, Ms. English could argue that she is entitled to be Acting Director because the President’s FVRA authority is no longer available.

To avoid this possibility, Mr. Mulvaney might attempt to remove Ms. English prior to June 22.  While the DFA allows the President to only remove the CFPB Director “for cause,” it does not speak directly to the Deputy Director’s removal.  Since the Director appoints the Deputy Director, presumably the Director could remove the Deputy Director  for any reason.  It is unclear, however, whether Mr. Mulvaney, as Acting Director, would also have that authority.

It is also unclear whether Mr. Mulvaney could appoint a new Deputy Director if he were able to remove Ms. English and whether a new Deputy Director appointed by Mr. Mulvaney would become Acting Director at the end of the 210-day period.  Another open question is whether President Trump could remove Ms. English without cause should she become Acting Director.  (Mr. Mulvaney has asserted on various occasions that President Trump can remove him without cause.)

Second, subject to our comment below, under the FVRA, any action taken by Mr. Mulvaney as Acting Director after 210 days would be void and could not be ratified.  Section 3348(d)(1) provides that “an action taken by any person who [is not acting in compliance with the FVRA] in the performance of any function or duty of a vacant office . . . shall have no force or effect.”  Section 3348(d)(2) provides that “an action that has no force or effect under paragraph (1) may not be ratified.”

We note that in a 1999 opinion, the Office of Legal Counsel indicated that once a nomination is made, even if after the 210-day period has expired, the Acting Director can resume the exercise of his authority.  The opinion describes FVRA Section 3346(a)(2) as containing a “spring-back provision, which permits an acting officer to begin performing the functions and duties of the vacant office again upon the submission of a nomination.”

Of course, Ms. English’s lawsuit continues to be the “wildcard” in any potential scenario.  A ruling in favor of Ms. English would not only be problematic for Mr. Mulvaney’s continued tenure as Acting Director but could also call into question the validity of any actions he has taken as Acting Director.

We are hopeful that President Trump will soon nominate a permanent Director, thereby eliminating these concerns and allowing Mr. Mulvaney to continue to serve as Acting Director pursuant to the FVRA pending confirmation of the President’s nominee.

The CFPB has issued a new report, “Complaint snapshot: Debt collection,” which provides complaint data as of April 1, 2018.  The report represents the CFPB’s first complaint report since Mick Mulvaney was appointed Acting Director.  The CFPB’s last regular monthly complaint report was issued in May 2017 and provided complaint data as of April 1, 2017.   (Subsequent complaint reports issued prior to former Director Cordray’s departure were “special edition” reports.)

The new report is different from prior monthly complaint reports in several significant respects:

  • While the new report includes overall complaint volume information by product and state that was previously part of the CFPB’s monthly complaint reports, it does not include complaint volume information by company (i.e. the “top 10 most-complained about companies.”)
  • It does not highlight complaints received in a particular state as did prior monthly reports.
  • It provides context for certain complaint data.  More specifically, as described below, the new report provides context for the complaint categories showing the greatest percentage changes over the three month periods compared in the report and for the debt collection data highlighted in the report.  (In the RFI seeking comment on potential changes to the CFPB’s practices for the public reporting of consumer complaint information, the CFPB has asked for comment on whether it should change the amount of context it provides for complaint information, particularly with regard to product or service market share and company size.)

Also noteworthy is that the new report was not accompanied by a press release or blog containing editorial spin about the report information.  Rather, the blog post accompanying the new report provides an objective overview of the report information.

General findings include the following:

  • As of April 1, 2018, the CFPB handled approximately 1,492,600 complaints nationally, including approximately 30,300 complaints in March 2018.
  • Credit reporting complaints and debt collection complaints represented, respectively, approximately 37 and 27 percent of complaints submitted in March 2018.
  • Credit reporting, debt collection, and mortgage complaints collectively represented about 74 percent of the complaints submitted in March 2018.
  • Money transfer or service and virtual currency complaints showed the greatest percentage increase from January-March 2017 (352 complaints) to January-March 2018 (1,000 complaints), representing an increase of approximately 184 percent.  The CFPB comments that the increase was “driven by a spike related to virtual currency” and that in the complaints submitted from January-March 2018 “consumers described issues with the availability of funds held at virtual currency exchanges during periods of price volatility for the most active virtual currencies.”
  • Credit reporting complaints showed the second greatest percentage increase from January-March 2017 (4,848 complaints) to January-March 2018 (11,107 complaints), representing an increase of approximately 129 percent.  The CFPB comments that improvements to its complaint submission process in April 2017 allowed consumers “to submit consumer reporting complaints about concerns they are having with data furnishers that supply consumer information to consumer reporting agencies, contributing to this increase in [credit reporting] complaints.”
  • Student loan complaints showed the greatest percentage decrease from January-March 2017 (monthly average of 3,273 complaints) to January-March 2018 (monthly average of 974 complaints), representing a decline of approximately 70 percent.  The CFPB comments that the decline “is likely because student loan complaint data was elevated in 2017 following the Bureau’s enforcement action against a student loan servicer.”

Findings regarding debt collection complaints include the following:

  • The CFPB has received approximately 400,500 debt collection complaints since July 21, 2011, representing 27 percent of all complaints.
  • The CFPB has referred approximately 40 percent of the debt collection complaints it has received to other regulators.  The CFPB states that it typically makes such referrals when a complaint is about a first-party collector, where the debt did not arise from a financial product or service, or when the company complained about does not appear to be a third-party collector of a financial product or service-related debt.
  • The CFPB comments that “debt collection complaints submitted by consumers can be more meaningful when considered in context with other data, such as the number of consumers who have an account in collection.”  The CFPB observes that according to its most recent annual FDCPA report, “millions of Americans” are affected by the debt collection industry, according to its Consumer Credit Panel, “about 26 percent of consumers with a credit file have a third-party collection tradeline listed.”
  • The most common concerns identified by consumers were attempts to collect a debt not owed (39 percent), written notification about debt (17 percent), and communication tactics (17 percent).
  • Based on its review of the narrative descriptions in complaints, the CFPB observed that:
    • Consumers complained about debts appearing on their credit reports without prior written notice of the existence of the debt and not receiving additional information requested about such debts from companies.
    • Consumers complained about communication tactics, such as frequent and repeated calls and calls before 8 am and after 9 pm and calls after having requested no further telephone contact about the debt.

The CFPB has indicated that it intends to move forward on debt collection rulemaking.  Its Spring 2018 rulemaking agenda states that the Bureau “is preparing a proposed rule focused on FDCPA collectors that may address such issues as communication practices and consumer disclosures” and estimates the issuance of a NPRM in March 2019.


According to a Politico report, CFPB Acting Director Mick Mulvaney, speaking at a Washington, D.C. event, commented on changes to the Bureau’s approach to bringing enforcement actions and the Bureau’s plans to review the use of the disparate impact theory of ECOA liability.

With regard to enforcement actions, Mr. Mulvaney is reported to have indicated that the Bureau plans to consider the scale and frequency of violations when deciding whether to bring an enforcement action against a company.  According to Politico, Mr. Mulvaney suggested that he might view a company’s violations as unintentional, and thus exercise his discretion not to take enforcement action, where the number of transactions that involve violations is a small fraction of the company’s total transactions.

While Mr. Mulvaney’s comments appear to have been directed to the CFPB’s decision to bring an enforcement action, it seems likely he would take a similar approach to the CFPB’s assessment of civil penalties in supervisory actions.  Among the factors listed in the matrix for assessing civil penalties used by OCC examiners is the duration and frequency of a bank’s violations before it was notified by the OCC of the violations.  This factor includes an evaluation of “the relationship of the number of instances of conduct to the bank’s total activity.”  In its RFI on its enforcement processes, the CFPB seeks comment on whether it should adopt a civil penalty matrix for determining the amount of civil penalties.

Politico also reported that Mr. Mulvaney indicated that, as a result of Congress’s override of the CFPB bulletin concerning discretionary pricing by auto dealers, the CFPB is reviewing the application of the disparate impact theory under the ECOA.  Although the bulletin set forth the CFPB’s disparate impact theory of assignee liability for so-called auto dealer “markup” disparities, Mr. Mulvaney is reported to have indicated that the Bureau’s review is not limited to the auto finance context and instead will look at the Bureau’s overall approach to ECOA liability.  His comments appear to be consistent with the statement issued by the CFPB following President Trump’s signing of the joint resolution overriding the CFPB bulletin in which the CFPB indicated that it would be reexamining ECOA requirements in light of “a recent Supreme Court decision distinguishing between antidiscrimination statutes that refer to the consequences of actions and those that refer only to the intent of the actor” and “the fact that the Bureau is required by statute to enforce federal consumer financial laws consistently.”




This afternoon, President Trump signed the Economic Growth, Regulatory Relief, and Consumer Protection Act (the Act) into law.  The Act was passed by the House on Tuesday by a vote of 258 to 159 and by the Senate on March 14 by a vote of 67 to 31.

Although the Act does not make the sweeping changes to the Dodd-Frank Act contemplated by other proposals, it nevertheless provides welcome regulatory relief to both smaller and larger financial institutions.  After President Trump signed the Act, CFPB Acting Director Mick Mulvaney issued a statement applauding Congress for passing the Act and indicating that he is “pleased to see the long-overdue reforms to the regulations governing mortgage lending.”  Mr. Mulvaney also stated that he “stand[s] ready to work with Congress and the rest of the Administration to implement these new reforms that will promote a brighter, more prosperous future.”

On June 19, 2018, from 12 p.m. to 1 p.m. ET, Ballard Spahr attorneys will hold a webinar—Economic Growth, Regulatory Relief, and Consumer Protection Act: Anatomy of the New Banking Statute.  The webinar registration form is available here.

In addition to the changes regarding mortgage lending, the Act makes a number of changes to provisions of federal laws regarding credit reporting, and loans to veterans and students.  It also reduces the regulatory burdens on financial institutions—particularly financial institutions with total assets of less than $10 billion.  Bank holding companies with up to $3 billion in total assets would be permitted to comply with less-restrictive debt-to-equity limitations instead of consolidated capital requirements.  This change should promote growth by smaller bank holding companies, organically or by acquisition.  Larger institutions should benefit from the higher asset thresholds that would apply to systemically important banks subject to enhanced prudential standards.  The higher thresholds may lead to increased merger activity between and among regional and super regional banks.

For a summary of some of the Act’s key provisions applicable to financial institutions, click here for our full alert.