Consumer Finance Insights
December 7, 2017

Second Lawsuit Against Trump’s Pick For CFPB Acting Director

On December 5, 2017, the Lower East Side People’s Federal Credit Union filed a lawsuit against President Trump and Mick Mulvaney over Trump’s appointment of Mulvaney as the Acting Director of the Consumer Financial Protection Bureau (CFPB). The case, Lower East Side People’s Federal Credit Union v. Trump, et al., No. 17-cv-9536 (S.D.N.Y.), filed in the U.S. District Court for the Southern District Court of New York, has been assigned to a Bush Administration appointee, Judge Paul Gardephe.

The lawsuit seeks relief under the Declaratory Judgment Act, 28 U.S.C. § 2201, asking that the court remove Mulvaney as Acting Director and instead install Leandra English, the pick of then-CFPB Director Cordray.  The Credit Union claims that the President has violated the constitutional separation of powers, and that it has standing to sue because, under the Administrative Procedures Act, the Credit Union has been adversely affected and aggrieved by the CFPB’s unjustified change in position in recognizing Mulvaney as its Acting Director.

The complaint asserts both a legal dispute over the interpretations of statutes and an articulation of a concern over the direction of the CFPB.  Specifically, the Credit Union alleges that President Trump can not rely on the Federal Vacancies Reform Act, 5 U.S.C. § 3345(a)(2), to appoint Mulvaney because the Dodd-Frank Act applies. In the alternative, it alleges that even if the President could appoint an Acting Director, he cannot appointment a White House employee to run an independent agency, because such an appointment would destroy the CFPB’s independence, which was one of the main purposes of the Dodd-Frank Act.  In addition, the Credit Union alleges that President Trump has created chaos with his appointment of Mulvaney, which came hours after former Director Cordray appointed English, leaving the regulated entities with no idea whom was in charge, nor what rules the entities should follow.  The Credit Union further complains that the appointment of Mulvaney is an attempt to destroy the CFPB.

This lawsuit comes on the heels of Leandra English’s own lawsuit for a temporary restraining order in the U.S. District Court for the District of Columbia.  She sought to block the appointment of Mulvaney on similar grounds to the Credit Union.  Her complaint similarly argued that President Trump misapplied the Federal Vacancies Reform Act, and that the Dodd-Frank Act applied instead, making the CFPB’s deputy director the Acting Director.  However, the judge in that lawsuit, Judge Timothy Kelly, a Trump Administration appointee, denied the restraining order, finding that there was not a substantial likelihood that the case would succeed on its merits.

The Credit Union’s lawsuit brings what had begun to move into a purely political fight over who could be confirmed in the Senate as the new Director, back into the legal realm, with the possibility of conflicting district court rulings.  That possibility would leave the leadership of the CFPB in disarray, and provide more uncertainty for the institutions the CFPB regulates.  Lenderlaw Watch will monitor any ongoing developments.