President Wins Round in the Battle for the Consumer Bureau
WASHINGTON — President Trump’s deregulation push got a boost after a federal judge denied an emergency request on behalf of an Obama-era holdover who disputed Mr. Trump’s decision to appoint a new acting director of the Consumer Financial Protection Bureau, delivering a legal victory to the White House, which argued that the president had the authority to install a new leader.
The ruling addressed a partisan legal spat at an agency thrown into chaos as two acting directors publicly laid claim to the title of rightful, if temporary, leadership. Both used every tool at their disposal, including baked goods and multiple all-staff emails. But the ruling effectively installed Mick Mulvaney, Mr. Trump’s pick and the current director of the White House Office of Management and Budget, as the acting leader of the bureau.
On Tuesday afternoon at a hearing, where attendees lined up behind a velvet rope and an overflow room had been set up, Judge Timothy J. Kelly of the Federal District Court in Washington jokingly remarked that there had “been some interest in our proceedings.”
In his ruling, Judge Kelly sided with lawyers for Mr. Trump and Mr. Mulvaney on the grounds that the Federal Vacancies Reform Act, signed into law in 1998, gives the White House the authority to appoint a replacement.
Legal experts and consumer advocates say the decision will most likely continue a protracted legal battle first initiated by Leandra English, who was elevated Friday to acting deputy director and presumed acting director when Richard Cordray, an Obama appointee, resigned a week earlier than expected. The dispute over who would lead the bureau intensified Sunday night, when Ms. English asked the court to provide an emergency restraining order to block Mr. Trump from appointing Mr. Mulvaney.
Deepak Gupta, a lawyer for Ms. English and a former senior counsel for the consumer bureau, said after the hearing that his legal team would be examining options going forward. One option, he said, would be to seek a preliminary injunction, a move similar in nature to Ms. English’s earlier restraining order request, but which would take longer to decide.
“Everyone understands this court is not the final stop,” Mr. Gupta said. “This judge does not have the final word in what happens in this controversy, and I think he understands that.”
The legal skirmish had pinned the language in two federal laws against each other. Ms. English and her lawyers argued that the Dodd-Frank Act, the 2010 law that established the bureau after a financial crisis, had made a succession plan clear: The deputy director was to serve as acting director in the absence of a permanent leader. Mr. Trump is able to appoint his own director, but confirmation could take months and slow Republican efforts to defang the agency. Mr. Cordray’s effort to appoint Ms. English was seen as an effort to extend this process.
In a court filing delivered late Monday, lawyers for Mr. Trump and Mr. Mulvaney had said that the confusion surrounding the bureau’s leadership stems from Ms. English’s “meritless claims” because the president, the Justice Department’s Office of Legal Counsel and the agency’s general counsel all agreed that Mr. Mulvaney was the acting director.
After Judge Kelly’s ruling, the White House applauded the decision.
“It’s time for the Democrats to stop enabling this brazen political stunt by a rogue employee,” Raj Shah, a White House spokesman, said in a statement, “and allow Acting Director Mulvaney to continue the bureau’s smooth transition into an agency that truly serves to help consumers.”
Judge Kelly, who was nominated by Mr. Trump and confirmed in September, said that he had not been convinced by the argument that the language in the Dodd-Frank Act superseded that in the Federal Vacancies Reform Act.
“On its face,” he said, “V.R.A. does appear to apply in this situation.”
The judge was also not swayed by the argument that Ms. English was at risk for irreparable harm, in this case losing her job as deputy director. But lawyers observing the case said that the decision on Tuesday still could keep day-to-day operations — and Ms. English’s job — at the bureau in limbo.
“This decision still leaves a lot of unanswered questions since Mulvaney will reportedly only spend three days of the week at the C.F.P.B.,” Dalié Jiménez, an associate professor of law at the University of Connecticut School of Law who spent roughly a year as a member of the founding staff at the bureau, said in an interview. “Does that mean that Leandra English as deputy director would be ‘in charge’ for the two days he’s not around? Mulvaney might move to demote or fire her at this point.”
The ruling also raises questions about the long-term path for the bureau. In a brief filed with the court, more than two dozen members of Congress — as well as former Representative Barney Frank, Democrat of Massachusetts — argued that the law clearly established Ms. English as the bureau’s acting director under Dodd-Frank, which was written to protect the agency from political influence.
Allowing the president to choose a successor under a different law would “mean that the bureau could be headed — potentially for many months — by an acting director handpicked by the president without the check of Senate confirmation, thus depriving the Bureau of the independence that was central to Congress’s plan in establishing it,” the brief said.
Edmund Mierzwinski, the consumer program director for the advocacy group U.S. PIRG, said that the group took issue with attempts by Mr. Trump to take a shortcut in installing an appointee.
“Nobody denies him that right” to appoint a nominee for director, Mr. Mierzwinski said, “but we do deny him the right to take over an independent agency without the advice and consent of the Senate.”
At the heart of the problem with Mr. Trump’s appointment, he said, is “how can you run the political Office of Management and Budget at the same time you run the independent consumer bureau?”
“That doesn’t compute.”
The bureau, which has helped nearly 30 million American consumers collect almost $12 billion in refunds and canceled debts, has been under assault by Republicans since it was formed. Mr. Trump has called the consumer bureau a “total disaster” that needed new leadership to “bring it back to life.” Mr. Mulvaney has been openly hostile to the bureau, calling it a “sad, sick” joke and supporting legislation to eliminate it.
Earlier Tuesday, Ms. English made it clear that she would fight to continue working at the bureau after Mr. Mulvaney’s tumultuous first day on the job.
“Yesterday, I spent time at the C.F.P.B., I reviewed transition materials, and I met with members of Congress to lay out my plans for ensuring that the consumer bureau continues to fight for working families,” Ms. English said in a statement relayed through Mr. Gupta. “Today, I plan on spending the day at C.F.P.B. headquarters taking calls and meetings with external stakeholders and bureau staff.”
Mr. Mulvaney sent his own message to staff members, reiterating an earlier directive to disregard messages from Ms. English in which she “purports” to be the acting director.
“I apologize for having to send this instruction again,” Mr. Mulvaney wrote to the staff. “And I feel terrible about you folks being put in this position, as I understand it can be both confusing and disruptive.”
By Tuesday evening, Mr. Mulvaney’s name and photo were listed under the “Director” section of the agency’s website. And he had already taken steps to shape regulatory activity inside the bureau, including a freeze on any significant actions, his lawyers said in court.