Judge Timothy Kelly of the District Court of the District of Columbia has denied a request for a restraining order that would have prevented White House budget chief Mick Mulvaney from becoming the interim chief of the Consumer Financial Protection Bureau.

By denying the restraining order, filed by CFPB Deputy Director Leandra English, Judge Kelly has essentially sided with the Trump administration that Mulvaney, and not English, runs the CFPB following the resignation of its Director, Richard Cordray.

This outcome is a big victory the Trump administration and Congressional Republicans in a larger struggle over the fate of the CFPB, which was created by the Dodd-Frank Act in 2010 and has been controversial from the start, due to its independence and scope of powers to penalize financial institutions for predatory behavior against consumers.

This brief, but pivotal, legal battle began on Friday, November 24, when CFPB Director Richard Cordray named Chief of Staff Leandra English deputy director of the bureau, according to a CFPB press release. Cordray then resigned his position as Director. English would be acting head of the CFPB until a permanent replacement could be confirmed by the U.S. Senate—a process that could take many months. The CFPB’s own rules state that in the absence of the Director, the Deputy Director runs the bureau.

Just hours after Cordray named English deputy director, however, the Trump Administration named Mick Mulvaney, the Director of the Office of Management and Budget, as the interim head of the CFPB instead, citing the 1998 Federal Vacancies Reform Act, which empowers the White House to name a replacement for agencies such as the CFPB.

On Sunday, Nov. 26, English filed a restraining order with the District Court of the District of Columbia to prevent Mulvaney from taking over the CFPB. This set the stage for an unusual Monday, Nov. 27 when Mulvaney showed up to work and CFPB staffers did not know who truly was running the CPFB.

On Tuesday, Nov. 28, Judge Timothy Kelly denied English’s request for a restraining order, essentially siding with Mulvaney and the Trump administration’s read on who has the ultimate authority to determine an interim head of the CFPB.

English, however, is not out of legal options, and may very well take her case to the Supreme Court, setting up a broader struggle not just over the fate of the CFPB, but the extent of executive power when it comes to it and agencies like it.

In the meantime, the CFPB is now headed by Mulvaney, who has in the past co-sponsored legislation that would have dismantled the CFPB altogether, has likened the existence of the agency as a kind of “sick joke” on American consumers, and has said in a House hearing, “I don’t like the fact that the CFPB exists, I will be perfectly honest with you.” Mulvaney has already imposed a 30-day freeze on any new hires at the agency, as well as any new regulations.

Earlier this year, the Trump Administration instructed the Treasury Secretary to report on how much existing financial regulations reflect the Administration’s own priorities. The resulting Treasury reports suggested initiatives that broadly seek to scale back or undo key provisions of the Dodd-Frank Act, including restricting the Consumer Financial Bureau so that it is directly accountable to Congress, which would then have the power to de-fund the agency, if deemed necessary. Mulvaney’s appointment as interim director makes this suggestion one step closer to reality.

Meanwhile, reaction to Kelly’s decision has largely been both political and partisan. On Twitter, President Trump praised the outcome. “Just won the lawsuit on leadership of Consumer Financial Protection Bureau, CFPB. A big win for the Consumer!” he tweeted. Meanwhile, consumer advocacy group Better Markets gave its own appraisal of the situation: “It's pretty simple: Winners: Wall Street Losers: The American People”.

The CFPB is largely considered to be the brainchild of Senator Elizabeth Warren (D-MA). “I believe the language of the Dodd-Frank law is clear and that Leandra English, not Mr. Mulvaney, is the legal Acting Director of the agency,” Warren wrote in a Nov. 27th letter to Mulvaney and White House Counsel Donn McGahn. “But regardless, to the extent that Mr. Mulvaney and any other OMB staff are presently at the CFPB, this raises a number of important questions about how they are handling this dual role.”

The questions Warren raised covered the potential operational, legal and ethical challenges of holding positions in two different government positions at once. Among Warren’s specific concerns:

What other OMB staff are joining Mulvaney at the CPFB, and by what means have the gone there—by appointment, by detail, or by other authority?

What ethics requirements will apply to Mulvaney in his role at the CFPB, and which of them are new requirements he did not have to comply with at the OMB?

Has Mulvaney consulted with the Designated Agency Ethics Official at the CFPB to determine compliance with the CFPB's ethics rules and regulations?

Has Mulvaney or his staff consulted with the White House Counsel or other ethics officials to avoid conflicts of interest between their dual roles at the CFPB and OMB?

What procedures are in place to ensure proper compliance with the Presidential Records Act, the Freedom of Information Act, and other relevant recordkeeping and transparency laws for all documents—including email and text communications, slides, memos, and letters—at both the CFPB and OMB?

Those questions have yet to be answered, but it appears Mulvaney will have plenty of time to do so between now and when a permanent Director is confirmed by the Senate—whenever that may be.

Topics