The Democratic attorneys general of 15 states and the District of Columbia have sent a letter to President Trump in which they express their support for the CFPB’s consumer protection mission and criticize the President’s appointment of Mick Mulvaney as CFPB Acting Director.  The 15 states are California, Connecticut, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Mexico, North Carolina, Oregon, Vermont, Virginia, and Washington.  In particular, the AGs contend that various statements made by Mr. Mulvaney about the CFPB “are categorically false, and should disqualify Mr. Mulvaney from leading the agency, even on an acting basis.”

Since the AGs’ presumably realize that their criticism is unlikely to cause President Trump to reconsider his appointment of Mr. Mulvaney, it would appear that the letter’s primary purpose is “saber rattling” by the AGs.  While providing examples of various enforcement matters on which state AGs have worked jointly with the CFPB, the AGs highlight their own “express statutory authority to enforce federal consumer protection laws, as well as the consumer protection laws of our respective states.”  The AGs state that they “will continue to enforce those laws vigorously regardless of changes to the CFPB’s leadership or agenda.  As attorneys general, we retain broad authority to investigate and prosecute those individuals or companies that deceive, scam, or otherwise harm consumers.”

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.  (AGs and regulators in several of the states joining in the letter to President Trump have already filed lawsuits using their Section 1042 authority.)

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.

The AGs warn that “if incoming CFPB leadership prevents the agency’s professional staff from aggressively pursuing consumer abuse and financial misconduct, we will redouble our efforts at the state level to root out such misconduct and hold those responsible to account.”  They further state that “regardless of the future direction or leadership of the CFPB, we as state attorneys general will vigorously enforce state and federal laws to ensure fairness and deter fraud.”  It is also important to note that CFPB staff, who may feel handcuffed by Mr. Mulvaney, can share information with sympathetic state AGs.


Last Friday, November 24, effective at midnight, Richard Corday resigned as CFPB Director.  Earlier in the day, the CFPB issued a press release announcing that Mr. Cordray had named Leandra English, the CFPB’s Chief of Staff, the CFPB Deputy Director.

Yesterday, Ms. English filed a complaint in D.C. federal district court seeking a declaration that she is the CFPB’s Acting Director and Mick Mulvaney, President Trump’s appointee to serve as Acting Director, is not the Acting Director.  She also filed an emergency motion for a temporary restraining order to prevent President Trump and Mr. Mulvaney “from appointing, causing the appointment of, or recognizing the appointment of an Acting Director of the [CFPB] via any mechanism other than that provided for by [the Consumer Financial Protection Act.]”

On Friday afternoon, following the CFPB’s announcement of Ms. English’s appointment, the White House issued a press release announcing that President Trump had designated Mr. Mulvaney, the Director of the Office of Management and Budget, to “serve as Acting Director until a permanent director is nominated and confirmed.”  The announcement was consistent with earlier reports that President Trump intended to appoint Mr. Mulvaney to serve as Acting Director effective upon Mr. Cordray’s resignation.

On Saturday, the DOJ’s Office of Legal Counsel (OLC) issued a memorandum to the President’s Counsel in which the OLC opined that the President had the legal right to appoint Mr. Mulvaney under the provision of the Federal Vacancies Reform Act (FVRA) that authorizes the President to temporarily fill an “executive agency” position requiring confirmation with someone serving in an acting capacity when the position becomes vacant because the person holding it “dies, resigns, or is otherwise unable to perform the functions and duties of the office.”  In the OLC’s opinion, the FVRA provision can be used by the President to override the provision in the Consumer Financial Protection Act (CFPA) that provides that the Deputy Director “shall serve as Acting Director in the absence or unavailability of the Director.”  (On Saturday, the CFPB’s General Counsel issued a memorandum to the CFPB’s Senior Leadership Team in which she agreed with the OLC’s analysis of the FVRA.)

In her memorandum in support of a TRO, Ms. English argues that the President’s use of the FVRA to appoint Mr. Mulvaney as Acting Director is unlawful because it contravenes the CFPA’s “specific, mandatory plan for filling the vacancy in question.”  Ms. English’s legal position is thus based on the premise that the CFPA provision that states the Deputy Director shall serve as Acting Director in the Director’s “absence or unavailability” covers a vacancy created by the CFPB Director’s resignation.  In its opinion, the OLC stated that “while the question is not free from doubt,” it believed “unavailability” should be construed to include a vacancy resulting from a resignation.

We continue to believe that compelling arguments can be made to support the position that “absence or unavailability” does not include a vacancy resulting from the Director’s resignation and will soon be publishing another blog post discussing those arguments.


According to media reports, President Trump is expected to name Mick Mulvaney, the current Director of the Office of Management and Budget, to serve as CFPB Acting Director upon Director Cordray’s resignation.  The President’s announcement may come as soon as today.

Assuming the media reports are accurate, they indicate that the White House has decided that David Silberman, the current CFPB Acting Deputy Director, does not automatically become Acting Director upon Director Corday’s resignation pursuant to the Dodd-Frank Act provision that provides that the Deputy Director shall “serve as acting Director in the absence or unavailability of the Director.”  In our view, because that provision does not cover the present situation (i.e., a vacancy created by the existing Director’s resignation and permanent departure from the agency), the Federal Vacancies Reform Act of 1998 permits President Trump to appoint as Acting Director either a senior employee of the CFPB or an officer of an agency who has already been approved by the Senate such as Mr. Mulvaney.

Interim Guidance issued by the Office of Information and Regulatory Affairs (OIRA) to implement President Trump’s executive order entitled “Reducing Regulation and Controlling Regulatory Costs” confirms that the order does not apply to independent agencies.  The executive order, issued on January 30, includes the requirement for an agency that publicly proposes a new regulation for notice and comment to identify at least two existing regulations to be repealed.

The guidance states that the executive order’s so-called “2 for 1” requirement and related limit on incremental cost resulting from any new regulations only apply to agencies required to submit significant regulatory actions to OIRA for review before publication in the Federal Register pursuant to Executive Order 12866.  As discussed in a previous blog post, the OIRA review requirement does not apply to agencies defined as an “independent regulatory agency” by 44 U.S.C. Sec. 3502(5), which include the CFPB.

Nevertheless, the guidance states that “we encourage independent regulatory agencies to identify existing regulations that, if repealed or revised, would achieve cost savings that would fully offset the costs of new significant regulatory actions.”

The guidance therefore confirms that unless the Trump Administration takes the position that it does not have to wait for the PHH appeal to be resolved before it considers the CFPB to no longer be an independent regulatory agency, the executive order does not currently apply to the CFPB except on a voluntary basis.

On February 3, 2017, the President issued an Executive Order titled “Core Principles for Regulating the United States Financial System.”  The Executive Order is a high-level policy statement consisting of a series of Core Principles that are designed to inform the manner in which the Administration regulates the financial system.

On March 6, 2017, Ballard Spahr will hold a webinar: “Leveling the Playing Field: CFPB Regulations and Guidance Targeted for Review by Treasury under President Trump’s February 3 Executive Order.”  In the webinar, we will identify CFPB regulations, guidance and policies which may run afoul of the core principles.  Click here to register.

The Executive Order was addressed during a press briefing held on the day it was issued.  During the press briefing, the White House Press Secretary explained that the Executive Order establishes “guideline principles that set[] the table for a regulatory system that mitigates risk, encourages growth, and more importantly, protects consumers.”  The Press Secretary asserted that the Dodd-Frank Act, which he said is “hindering our markets, reducing the availability of credit, and crippling our economy’s ability to grow and create jobs,” did not “address the causes of the financial crisis” or adequately address the risk posed by institutions that are “too big to fail.”

The Executive Order seeks to address these concerns by establishing seven “Core Principles,” which are the goals that will guide the Administration’s approach to financial services regulation.  Although none of them expressly mention the CFPB or consumer financial protection, four of the core principles implicate the regulation of consumer financial services:

  • Empower Americans to make independent financial decisions and informed choices in the marketplace, save for retirement, and build individual wealth;
  • Foster economic growth and vibrant financial markets through more rigorous regulatory impact analysis that addresses systemic risk and market failures, such as moral hazard and information asymmetry;
  • Make regulation efficient, effective, and appropriately tailored; and
  • Restore public accountability within Federal financial regulatory agencies and rationalize the Federal financial regulatory framework.

For example, the principle requiring a more rigorous regulatory impact analysis apparently foreshadows an emphasis by the Administration on the cost of regulation and its potential adverse economic effects.  While the final principle speaks for itself, additional context is evident from a remark that the Press Secretary made during his press briefing.  Specifically, the Press Secretary asserted that the Dodd-Frank Act “imposed hundreds of new regulations on financial institutions while establishing [an] unaccountable and unconstitutional new agency that does not adequately protect consumers.”

The CFPB and its advocates would vigorously contest the assertion that the Bureau has not adequately protected consumers, and some already have done so in response to the issuance of the Executive Order.  For example, in a press release condemning the Executive Order, Illinois Attorney General Lisa Madigan stated that “[t]he CFPB has a tremendous record of uncovering and ending unfair financial practices that undermine Americans’ financial security.”  Attorney General Madigan further stated that”[m]any predatory and unlawful financial practices that targeted consumers were at the heart of the country’s economic collapse.”

In addition to specifying a series of Core Principles, the Executive Order directs the Secretary of the Treasury to consult with the heads of the member agencies of the Financial Stability Oversight Council (FSOC) and report to the President “on the extent to which existing laws, treaties, regulations, guidance, reporting and recordkeeping requirements, and other Government policies promote the Core Principles and what actions have been taken, and are currently being taken, to promote and support the Core Principles.”  (The Director of the CFPB is one of the voting members of the FSOC.)  The Executive Order further requires that the report “identify any laws, treaties, regulations, guidance, reporting and recordkeeping requirements, and other Government policies that inhibit Federal regulation of the United States financial system in a manner consistent with the Core Principles.”  The report must be submitted within 120 days of the date of the Executive Order, which contemplates that additional reports will be submitted “periodically thereafter.”

In response to a question regarding whether the Administration planned on working with Congress to repeal provisions of the Dodd Frank Act, the Press Secretary responded that “I think we’re going to continue not just to act through administrative action, but through working with Congress and figuring out a legislative fix.”  During the press briefing, a member of the press also asked whether the Administration intended “to keep Richard Cordray as the head of” the CFPB.  The Press Secretary responded that, “I don’t have a staff announcement on the CFPB right now, but we’ll see where we go.”

There has been some debate about President Trump’s authority to designate a replacement for Director Cordray should he resign or be removed by the President.

The Dodd-Frank Act authorizes the CFPB Director to appoint a Deputy Director who shall “serve as acting Director in the absence or unavailability of the Director.”  Since the resignation of Steven Antonakes as Deputy Director in July 2015, the position of Deputy Director has remained unfilled.  Currently, David Silberman is serving as Acting Deputy Director.  Should Director Cordray resign or be removed by the President, it is unclear whether an Acting Deputy Director would be eligible to serve as Acting Director under the Dodd-Frank provision.

Assuming Mr. Silberman could not serve as Acting Director (or was also removed by President Trump), the President might be able to rely on the Federal Vacancies Reform Act of 1998 to temporarily fill the vacancy with one of his Senate-confirmed Cabinet members or another confirmed agency head until his nominee for Director is confirmed.  The Act provides that “if an officer of an Executive agency…whose appointment to office is required by the President, by and with the advice and consent of the Senate, dies, resigns or is otherwise unable to perform the functions and duties of the office…the President (and only the President) may direct a person who serves in an office for which the appointment is required to be made by the President, by and with the advice and consent of the Senate, to perform the functions and duties of the vacant office temporarily in an acting capacity [subject to the Act’s time limitations.]”

It is unclear, however, whether Director Cordray would be considered the officer of an “executive agency” for purposes of the Act (which does not define the term).  The CFPB is designated an “executive agency” by the Dodd-Frank Act for purposes of its placement within the Executive Branch.  However, for purposes of the independence of its leadership, it is structured as an “independent agency” rather than an “executive agency.”  In its PHH decision, which has not yet taken effect, the D.C. Circuit changed the CFPB’s structure from an independent to an executive agency.  The Trump Administration could take the position that it does not have to wait for the PHH appeal to be resolved before it considers the CFPB to no longer be an independent agency.

Dodd-Frank Act Section 1066, entitled “Interim Authority of the Secretary,” authorized the Secretary of the Treasury “to perform the functions of the Bureau” under Subtitle X “until a Director is confirmed.”  Although it appears this provision would no longer apply pending confirmation of the next director, it suggests that Steven Mnuchin, President Trump’s nominee for Treasury Secretary, would be an appropriate person for Mr. Trump to designate under the Act as Acting CFPB Director (assuming Mr. Mnuchin is confirmed).  In addition, since only a simple majority vote would be required to confirm Mr. Trump’s nominee for CFPB Director, the confirmation process should not be lengthy (barring any legal action brought challenging Director Cordray’s removal that would delay the process).

The 2016 presidential election’s effect on the CFPB and the consumer financial services industry is the subject of considerable speculation and interest.  On Wednesday, February 8, 2017, from 12:00 pm to 1:00 pm ET, we will hold a special webinar, “Consumer Financial Services Under the Trump Administration,” to discuss many of the questions that are now being asked about the future of the CFPB and consumer financial services regulation.  Those questions includes how Director Cordray’s departure from the CFPB before his term expires in July 2018 would affect the CFPB, the likelihood that the CFPB will finalize pending rulemaking, the impact of Republican control on the FTC, and the future role of state attorneys general, departments of banking, and private civil litigation.

In addition to Ballard Spahr partner Chris Willis, the webinar will feature two renowned consumer law professors: Professors Jeff Sovern and Dee Pridgen.  Professor Sovern is a coordinator of the Consumer Law & Policy Blog.  More information about the webinar and a link to register is available here.

The Trump transition team has released the names of three more individuals who will be members of the CFPB landing team.  “Landing teams” are members of the incoming president’s transition team tasked with gathering information about their assigned agency.

We previously reported that Paul Atkins would be on the landing team for the CFPB as well as the landing teams for the FDIC and OCC.  According to the President-elect’s website, Mr. Atkins will also be a member of the FTC landing team.  Mr. Atkins is an attorney who served as a commissioner on the SEC from 2002 to 2008.  He is currently CEO of a company that provides consulting services regarding financial services industry matters, including regulatory compliance, risk and crisis management, public affairs, independent reviews, litigation support, and strategy.

The other CFPB landing team members are:

  • Kyle Hauptman. Mr. Hauptman is currently a Senior Development Manager at the American Enterprise Institute (AEI) and a member of the SEC’s Advisory Committee on Small and Emerging Companies.  (AEI describes itself as “a public policy think tank” whose work “advances ideas rooted in our belief in democracy, free enterprise, American strength and global leadership, solidarity with those at the periphery of our society, and a pluralistic, entrepreneurial culture.”)
  • Consuala “CJ” Jordan. Ms. Jordan is currently President and CEO of a government relations firm that specializes in strategic business development and President of the National Black Republican Leadership Council.
  • Julie Bell Lindsay. Ms. Lindsay is an attorney who currently is the Managing Director and General Counsel of Capital Markets and Corporate Reporting at Citigroup Inc.

As a result of Donald J. Trump’s election as President, coupled with the Democrats’ failure to wrest control of the House or Senate from the Republicans, the CFPB can be expected to undergo significant changes that are likely to have the effect of reducing the agency’s impact.

On November 30, 2016, from 2 p.m. to 3 p.m. ET, Ballard Spahr attorneys will hold a webinar, “Election Post-Mortem: What It Means for the CFPB, Other Federal and State Regulators, and the Industry.”  The webinar registration form is available here.

The most visible expected change is Mr. Trump’s replacement of Director Richard Cordray.  How soon that occurs post-inauguration may depend on whether the CFPB seeks further judicial review of the D.C. Circuit’s decision in CFPB v. PHH Corporation and, if so, the outcome of such review.  In its decision, the D.C. Circuit ruled that the CFPB’s single-director-removable-only-for-cause structure was unconstitutional.  To remedy the constitutional defect, the court severed the removal-only-for-cause provision from the Dodd-Frank Act so that the President can now “remove the Director at will at any time.”  Unless and until the PHH decision takes effect (or Congress amends the Dodd-Frank Act), Mr. Trump could only remove Director Cordray “for cause” before the Director’s term ends in 2018.

Once appointed by Mr. Trump, a new Director can be expected to take aim at the CFPB’s “rulemaking by enforcement” approach that has been the target of Republican criticism by decreasing CFPB enforcement activity while using CFPB rulemaking as a way to limit the CFPB’s exercise of its enforcement authority.  For example, a new Director might seek the CFPB’s adoption of a rule to define the practices that are considered “abusive” for purposes of the CFPB’s authority to prohibit unfair, deceptive, or abusive acts or practices.  A new Director’s efforts to promote rulemaking over enforcement might also include seeking the repeal of the CFPB’s auto finance fair lending guidance.  (One of the criticisms leveled at the guidance is that it should not have been adopted outside the rulemaking process.)

In addition, if the CFPB’s proposed payday lending and arbitration rules have not been finalized when a new Director is appointed, a new Director might seek to withdraw or amend the proposals.  Also, since the CFPB has not yet issued a proposed debt collection rule but has issued only an advance notice of proposed rulemaking, it is possible a proposed rule, if any, will not be issued until a new Director is in place and therefore might be more industry-friendly.  (These potential scenarios could also motivate Director Cordray to accelerate the three rulemakings.)

The election results also substantially increase the likelihood that Congress will enact some of the reforms to the CFPB’s structure, funding, and operation that have been the subject of numerous bills introduced by Republicans over the approximately five years the CFPB has been operational.  Such bills include “The Financial CHOICE Act of 2016,” the Dodd-Frank Act replacement bill that was approved this past September by the House Financial Services Committee.  Most notably, the CHOICE Act, like previous Republican bills, would replace the CFPB’s current single director with a bipartisan, five-member commission and fund the agency through the appropriations process rather than through transfers from the Federal Reserve.  The effects of these changes are likely to include a longer timeline for CFPB rulemaking, a less partisan-driven CFPB agenda, and greater Congressional influence on CFPB decision-making.