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Banking/finance CFPB leadership struggle


Leadership clash at CFPB continues as two claim mantle By Kate Berry and Ian McKendry November 24, 2017 WASHINGTON — Two people are now claiming to be the rightful leader of the Consumer Financial Protection Bureau. CFPB Director Richard Cordray’s final act to appoint his own interim successor before stepping down — Leandra English, the agency’s chief of staff — came hours before the Trump administration named Office of Management and Budget Director Mick Mulvaney as the temporary director. It is now unclear who is legally entitled to the job, and both appear likely to show up Monday to claim the mantle. For its part, the Trump administration insisted Saturday that Mulvaney was in charge, claiming that English, now the deputy director of CFPB, works for him. “Director Mulvaney will be the acting director and will take up his office at the CFPB and begin overseeing the CFPB” on Monday, a senior administration official said on a call with reporters. Another administration official added that, “We don’t have any reason to think that anything out of the ordinary course will happen.” But Democrats were disputing that claim, arguing that the Trump administration was attempting to unlawfully steal leadership of the CFPB while a permanent successor is nominated and confirmed. “The Dodd-Frank Act is clear: if there is a CFPB director vacancy, the deputy director becomes acting director. President Trump can’t override that,” Sen. Elizabeth Warren, D-Mass.,wrote on Twitter Friday night. Ultimately, the issue will likely go to the courts. “There’s going to be a court battle, and it has the potential to embroil the Trump administration in another difficult court challenge,” said Christopher Peterson, a profes-

AMERICAN BANKER sor at the University of Utah’s S.J. Quinney College of Law and a former CFPB special adviser to Cordray. “This is uncharted territory.” At issue is the language of Dodd-Frank, which says that the bureau’s deputy director will serve as acting CFPB director in the “absence or unavailability of the director.” That is different from the earlier Federal Vacancies Reform Act, which generally gives the president the power to appoint any Senate-confirmed individual to the temporary leadership of an independent agency. The White House said Saturday that the Federal Vacancies Reform Act takes precedence over the CFPB’s statute. “The Vacancies Act is also there as a way that the president can supersede the way those agencies statutes work,” said a senior administration official. “To us this seems like a pretty clear-cut legal question.” The administration released a Justice Department memo late Saturday that justified its move. But lawyers said the question of whether Dodd-Frank, which was more recently enacted, supersedes the Federal Vacancies Reform Act will likely be challenged. The Trump administration also argues that Cordray’s voluntary departure doesn’t count as an “absence or unavailability.” “The question turns on whether resignation means unavailability,” said Andrew

Sandler, chairman and executive partner at Buckley Sandler. “It’s a real legal issue.” Democrats had already staked out the position that Dodd-Frank trumps the Federal Vacancies Reform Act. “Ms. English should be allowed to serve as Acting Director until a Director is confirmed by the full Senate, consistent with the process articulated in the law that created the Consumer Bureau,” said Rep. Maxine Waters, D-Calif., the top Democrat on the House Financial Services Committee. Regardless, the Trump administration moved forward anyway with plans to appoint Mulvaney, saying the president “looks forward to seeing Director Mulvaney take a common sense approach to leading the CFPB’s dedicated staff.” The White House said the Office of Legal Counsel has already weighed in on the matter and determined that Mulvaney can lead the agency. But that is not clear, lawyers said. “It will take some time to sort this out since the outcome won’t be determined until the case has been appealed and decided by the Court of Appeals and, perhaps, the U.S. Supreme Court,” said Alan Kaplinksy, a partner at Ballard Spahr. “In the meantime, I suspect things at the CFPB will grind to a screeching halt.” The issue not only impacts the CFPB. By law, the director of the consumer bureau has a seat on the Federal Deposit Insurance

The Trump administration named Office of Management and Budget Director Mick Mulvaney as acting director of the Consumer Financial Protection Bureau.


AMERICAN BANKER Corp. board as well as a seat on the Financial Stability Oversight Council. The CFPB’s press office did not return multiple requests for comment. Until Friday, there had been no permanent deputy director at the CFPB. The job was filled by David Silberman, the agency’s associate director of research, markets and regulation, on an acting basis. But on Friday, Cordray declared that English would be the new deputy director, and he specified she would be in charge after he left later that day. “In considering how to ensure an orderly succession for this independent agency, I determined that it would be best to avoid leaving this key position filled only in an acting capacity,” Cordray wrote in a letter to staff on Friday. “In consultation over the past few days, I have also come to recognize that appointing the current chief of staff to the deputy director position would minimize operational disruption and provide for a smooth transition given her operational expertise.” English has previously held leadership positions at the CFPB, the Office of Management and Budget and the Office of Personnel Management. Cordray’s move was panned by industry representatives and praised by consumer advocates. Some said it reinforced Republican arguments that the CFPB’s single-director structure is unconstitutional, a key issue currently being decided by a federal appeals court. “Today’s actions by former CFPB Director Richard Cordray in appointing his own acting director to lead the bureau reinforces the problematic nature of having a single and completely unaccountable leader,” said Chris Stinebert, president and CEO of American Financial Services Association, an industry trade group. But consumer groups said Cordray was acting within his rights. “There are two schools of thought,” said Mike Calhoun, president of the Center for Responsible Lending. “We believe that the Dodd-Frank Act specifically provides that it’s the deputy director” that leads the CFPB in the interim. Calhoun said President Trump should go through the normal process of nominating a CFPB director who can be confirmed by the Senate. “The Republicans control Congress and

the Senate and the White House and they can nominate and process through the Senate their nominee,” Calhoun said. Richard Hunt, president and chief executive of the Consumer Bankers Association, said that, regardless, Trump will eventually wrest control of the bureau. “At the end of the day there will be a Republican running that place, whether it’s Monday, or February or June,” Hunt said, “and Cordray’s last action will only infuriate Republicans more to eliminate the CFPB.” Updated November 25, 2017 at 12:00PM: This story is being constantly updated based on new information. Please check back frequently for the latest information.

CFPB’s English sues Trump administration to block Mulvaney appointment By Kate Berry November 26, 2017 Leandra English, the deputy director of the Consumer Financial Protection Bureau, sued the Trump administration late Sunday to block the appointment of Office of Management and Budget Director Mick Mulvaney as interim director of the consumer agency. The lawsuit was filed by English herself, not the CFPB, which took the official position that Mulvaney is in charge. The agency’s general counsel, Mary McLeod, drafted a memo late Sunday supporting the Trump administration’s position. “I advise all Bureau personnel to act consistently with the understanding that Director Mulvaney is the acting director of the CFPB,” McLeod wrote. The lawsuit , English v. Trump, was filed in the U.S. District Court for the District of Columbia, seeking an injunction ordering

President Trump to halt the Mulvaney appointment. English was appointed deputy director on Friday as CFPB Director Richard Cordray stepped down, a role that would serve as acting director in the absence of a Senate-confirmed leader. But hours later, President Trump named Mulvaney as the acting director, leaving it unclear which of the two was the lawful head of the CFPB. English has been in the unenviable position of having to decide whether she will sue the president on what would be just her second day in the job. The lawsuit seeks a quick judgment from the court as well as a temporary block to Mulvaney’s appointment. American Banker reported earlier Sunday that a lawsuit by English was in the offing. In a statement, Sarah Huckabee Sanders, the White House press secretary, said “the law is clear: Director Mulvaney is the acting director of the CFPB.” She specifically cited the memo by McLeod that said the Mulvaney appointment was legitimate. “Now that the CFPB’s own general counsel — who was hired under Richard Cordray — has notified the bureau’s leadership that she agrees with the administration’s and [the Justice Department]’s reading of the law, there should be no question that Director Mulvaney is the acting director,” Sanders said. “It is unfortunate that Mr. Cordray decided to put his political ambition above the interests of consumers with this stunt.” Still, the issue is likely to remain in flux until a court makes a decision. “The legal issues are complex enough that the leadership of the bureau is likely to remain uncertain until a court definitively resolves it,” said Christopher Peterson, a law professor at the University of Utah’s S. J. Quinney College of Law, and a former CFPB special adviser to Cordray. English’s lawsuit delves into two distinct legal areas. The first is a statutory conflict between the Dodd-Frank Act and the Federal Vacancies Reform Act over who has the right to appoint an interim successor at the agency. The second legal argument, which has received less attention, is whether the White House is trying to improperly assume control of an independent agency by naming Mulvaney, who reports directly to the president and has the status of a Cabinet-ranked

PAGE 4 position as head of OMB. “The President may not, consistent with the statutory requirement of independence, install a still-serving White House staffer as the acting head of an independent agency— particularly when doing so would displace an acting head who has a clear legal entitlement to the position,” the lawsuit says. Naming Mulvaney to head the CFPB while he also reports directly to President Trump is akin to naming a senior adviser at the White House to simultaneously be chair of the Federal Reserve Board, Peterson said. “The reason the Fed is an independent agency within the executive branch is that Congress wanted the Fed’s monetary policy decisions to be separate from politics,” Peterson said. The director of the CFPB is also supposed to be shielded from politics because of the judicial and law enforcement functions of the job, which involve filing enforcement actions and deciding appeals. “It’s true that Congress demonstrated an intent in the Dodd-Frank Act for the bureau to be independent and having someone run the agency who reports directly to the executive office of the president goes against the notion of independence,” said Jenny Lee, a partner at Dorsey & Whitney. The Dodd-Frank Act, which created the CFPB, explicitly specified the role of the president. It states that the president can nominate a CFPB director who is confirmed

AMERICAN BANKER by the Senate and can only fire the director “for cause.” “Those are his powers; that’s it,” said Peterson. To be sure, the CFPB has been headed by a Cabinet official in the past. When it was created in 2011, then-Treasury Secretary Timothy Geithner played a role in setting up the agency. But that was allowed under a special statutory section in Dodd-Frank and only applied to setting up and launching the agency. The Trump administration has only taken a position so far on the first legal argument, saying that the Vacancies Reform Act gives the president broad discretion on appointments. The White House said Saturday that the Federal Vacancies Act takes precedence over language in Dodd-Frank, which says that the bureau’s deputy director will serve as acting CFPB director in the “absence or unavailability of the director.” It released a Justice Department memo late Saturday detailing its legal justification for the move. Outside lawyers are divided on the matter. Laurence Tribe, a constitutional law professor at Harvard Law School, said in a tweet that Trump is “100% wrong on who steps into Cordray’s shoes,” based on the history and drafting of Dodd-Frank. He was supported by former Rep. Barney Frank, D-Mass., who told news outlets that congressional intently clearly gave the power to

Part of the suit against OMB Director Mick Mulvaney’s appointment says he cannot be director because he already reports directly to the president.

a CFPB director. But some outside lawyers said the administration has a strong case. Andrew Hessick, a law professor at the University of North Carolina School of Law, said he was not aware of any statute that prohibits dual appointments. “This is a special action when two people are claiming the same office and how the courts resolve it,” Hessick said. “There might be a lawsuit filed and almost certainly the president’s position will win because his argument is pretty good, and even outside the law, the president has an awful lot of power when it comes to these kinds of appointments, and he and Congress can makes life miserable for the CFPB.” In her memo, the CFPB’s McLeod said the battle over the wording of Dodd-Frank wasn’t important. “The statutory language, legislative history, precedent from the Office of Legal Counsel at the Department of Justice, and case law all point to the conclusion that the President may use the Vacancies Reform Act to designate an acting official, even when there is a succession statute under which another official may serve as acting,” she wrote. “As General Counsel for the Bureau, it is my legal opinion that the President possesses the authority to designate an acting director for the Bureau.” Historically courts resolve this type of dispute through a ruling on a writ of quo warranto, a special form of suit used to resolve a fight over whether a specific person has the legal right to hold public office. Even if a lawsuit is filed, there is still the prospect that both English and Mulvaney will report to the CFPB for work on Monday morning claiming to be the leader. Lawmakers are already weighing on the matter. Sen. Sherrod Brown, the top Democrat on the Senate Banking Committee, issued a press release late Sunday saying English was the legal head of the CFPB. “The Dodd-Frank law is clear that Deputy Director English is the legal acting director, and she must be allowed to continue the agency’s work standing up for working families against financial abuse until a permanent Director is confirmed by the Senate,” Brown said. English has served as the CFPB’s chief of staff, deputy chief operating officer, as well as acting and deputy chief of staff. She had been a principal deputy chief


AMERICAN BANKER of staff at the Office of Personnel Management, the chief of staff and senior adviser to the deputy director for management at the White House Office of Management and Budget, and was a member of the CFPB implementation team at the Treasury Department during the Obama administration. English retained Deepak Gutpa, the founding principal of Gutpa Wessler, a boutique law firm that specializes in Supreme Court, appellate and complex litigation on constitutional and consumer rights issues.

Mulvaney pledges ‘dramatic’ shift at CFPB, freezes rules and hiring By Rob Blackwell and Ian McKendry November 27, 2017 WASHINGTON — The Trump administration’s pick as acting director of the Consumer Financial Protection Bureau said Monday that the agency would be “dramatically different” under new leadership, even as a federal judge declined to decide yet on the legality of the appointment. Mick Mulvaney, who is also the director of the Office of Management and Budget, said President Trump wanted him to “fix” the agency, ensuring it protected consumers without cutting off access to financial services. At the outset, he said he has instituted a 30-day hiring and policymaking freeze while he reviews all rules and guidance still pending before the agency. But he acknowledged some items already out the door, such as the final rule to restrict shortterm lending, are beyond his purview to stop. Though he sounded almost reluctant about it at times in a press briefing with reporters, Mulvaney said the agency would continue operations as normal, but with a twist. “The agency will stay open,” Mulvaney

said. “Rumors that I will set the place on fire or blow it up or lock the doors are false. I’m a member of the executive branch of government. We execute the law.” Still, it would be run differently, he said. “That being said, the way we go about it, the way we enforce it, the way we interpret it, will be dramatically different under the current administration than it was under the last,” Mulvaney said. “Anybody who thinks that a Trump administration’s CFPB would be the same as the Obama administration’s CFPB is being naive. Elections have consequences at every agency, and that includes the CFPB.” His comments come as a legal battle continues to be waged over the legality of his appointment. Leandra English, the deputy director of the CFPB, filed suit late Sunday claiming that she, not Mulvaney, was the legal acting head of the bureau. District Judge Timothy J. Kelly held a hearing on the matter late Monday, but said the Trump administration needed more time to respond before he could issue a ruling. These are “important and complicated issues,” Kelly said. English argues that the Dodd-Frank Act, which created the CFPB, specifically allows the director of the agency to name an interim director. Her lawyers also argued that Mulvaney is not distant enough from the administration to run an independent

agency. “The Dodd-Frank Act is very, very clear that it establishes an” independent agency, said Deepak Gupta, a partner with Gupta Wessler who is representing English. Lawyers for the administration cited analysis by the Justice Department and the CFPB’s general counsel that Mulvaney was the rightful interim director of the consumer bureau. Both sides said a decision needed to be made soon. Meanwhile, 25 congressional Democrats — including Senate Minority Leader Chuck Schumer of New York, House Minority Leader Nancy Pelosi of California and Sen. Elizabeth Warren of Massachusetts — as well as former Democratic Rep. Barney Frank filed an amicus brief Monday night supporting English’s claim as the acting leader of the agency. “Whether the White House likes it or not, the law mandates that Deputy Director Leandra English serve as Acting Director of the Consumer Financial Protection Bureau until the Senate confirms a new, permanent Director,” Pelosi said in a statement. English also drew support from former CFPB Director Richard Cordray, who had appointed her as deputy director before announcing his resignation Friday. In an interview on MSNBC Monday night, Cordray said the law was “clear” that “the deputy director shall act as the director until

“I was just learning about the powers that I have as acting [CFPB] director - they would frighten most of you,” said OMB Director Mick Mulvaney.

PAGE 6 a nominee is presented to the Senate and confirmed.” “This is the kind of a disagreement that involves two different laws. They conflict with one another,” Cordray said. “The right place to hash that out is in the courts, which is where it is right now. It shouldn’t be decided by name-calling and tweets and insults. It should be decided by people presenting their arguments and a judge thinking it over … and it will ultimately be resolved.” During his press briefing, Mulvaney disputed the idea that his appointment was improper because he was also a Cabinet official, insisting that the job always answers to the president. He noted that former Treasury Secretary Timothy Geithner helped set up the CFPB when it was created by the Dodd-Frank Act before the Obama administration chose Cordray as the agency’s first director. “This is how it’s been done here,” Mulvaney said. “I will be as closely tied to Donald Trump as president as Secretary Geithner and Mr. Cordray were to President Obama. I don’t think it’s anything different.” (The Dodd-Frank Act specifically gave the power to the Treasury secretary to set up the bureau, but that part of the law no longer appears to apply in this case.) Mulvaney said he would work three days a week at CFPB and three days a week at OMB. He also stood by his past criticisms of the CFPB, which he once described as “sick” and “sad.” “My opinion of the CFPB has not changed,” he said. “I still think it’s an awful example of a bureaucracy that has gone wrong and is almost entirely unaccountable to the people that are supposed to oversee it and supposed to pay for it. I still have the same fundamental principled misgivings about the way this bureau is structured. ... That being said, that is outside the bounds of the director to fix.” He said he supported efforts to put the CFPB on congressional appropriations and add more safeguards, but that was an issue for Congress, not him. “I was just learning about the powers that I have as acting director — they would frighten most of you,” he said. “It would probably worry you to find out how little oversight Congress has over me right now as acting director.” Asked if he would eliminate the agency if he could, Mulvaney said he would have

AMERICAN BANKER preferred to have consumer protection functions stay with other government agencies as they were previously prior to DoddFrank. He also took the CFPB to task for failing to uncover problems at Wells Fargo last year. Though the agency took a joint enforcement action against Wells related to its employees opening potentially millions of phony accounts, Mulvaney questioned why it hadn’t been detected sooner. “I am disturbed by what happened at Wells Fargo,” he said. “My question is: Why did [the CFPB] miss it?” Overall, he said his goal was to change the way the agency enforced consumer protection laws. President Trump “wants me to fix it,” Mulvaney said. “He wants me to get it back to the point that it can protect people without trampling on capitalism, without choking off the access to financial services that are so critical to so many folks, and so many folks in the lower and middle classes.” Senate Democrats, meanwhile, continued to sharply criticize the appointment, saying it was unlawful and improper. Warren and Schumer held a joint appearance with English to support her. “Right now we need the courts to play this out,” Warren told reporters. “President Trump has put a cloud over the agency by invoking a statute that doesn’t apply here.”

At CFPB, bitter feelings about final Cordray maneuver

By Kate Berry and Ian McKendry November 28, 2017 Employees at the Consumer Financial Protection Bureau are privately questioning why outgoing director Richard Cordray abruptly tapped a 34-year-old chief of staff with no enforcement, supervisory or legal experience to head the embattled agency after he resigned. Many were caught off guard when Cordray handed the reins to Leandra English by naming her deputy director as he stepped down on Friday. The White House

also appeared surprised, scrambling to officially name Mick Mulvaney, the director of the Office of Management and Budget, as interim director. English and Mulvaney have been engaged in a legal standoff since Sunday night over control of the bureau. In interviews, several current and former CFPB officials, most of whom did not want to speak on the record, were upset by Cordray’s eleventh-hour move during a holiday weekend, typically a time when the only news that is released is the kind people want to bury. They were also angry at his choice, arguing that English was not experienced enough for the job. “It was shocking to people that English was selected,” said one former CFPB employee, who spoke on the condition of anonymity. “Many people were questioning Leandra’s qualifications and her experience. It’s symptomatic of the environment at the CFPB where they just handpick whomever they want and this cronyism and favoritism leads to discrimination.” Little is known about English. Previously, she worked as a principal deputy chief of staff at the Office of Personnel Management, the chief of staff and senior adviser to the deputy director for management at OMB, and was a member of the CFPB implementation team at the Treasury Department during the Obama administration. But she’d only formally served as the agency’s chief of staff since January, and has never been subjected to the kind of public scrutiny that comes from holding a top-level post. One key question was why Cordray passed over David Silberman, who had served as acting deputy director for nearly two years, in naming a full-time deputy director. Silberman kept his job as associate director of research, markets and regulations. Cordray’s move was widely panned outside the agency, with many blaming him for sowing discord at the CFPB as he left. Though Cordray has claimed he was following the Dodd-Frank Act in appointing English as acting director, the CFPB’s own general counsel, Mary McLeod, disagreed. “This was a continuation of Richard Cordray’s historical practices as he went out the door to create as much chaos and conflict as he could,” said Scott Pearson, a lawyer at Ballard Spahr. Richard Hunt, the president and CEO of


AMERICAN BANKER the Consumer Bankers Association, questioned why Cordray waited until the last minute to name a new deputy director. “I like Leandra, I think she was a terrific chief of staff, and she did everything she could to keep the trains running on time,” Hunt said. “But she has never run a government agency, never run a business and never worked at a bank. I hope she’s not being used as a pawn, because certainly David Silberman was highly qualified to serve.” Democrats have rallied to English’s defense, but that may not help her cause. English barely spoke at a public appearance Monday with Sen. Elizabeth Warren, D-Mass., and Senate Minority Leader Chuck Schumer, D-N.Y., that appeared awkward. Mulvaney used the appearance to accuse her of playing politics while he was at the

banks,” Warren said. The progressive groups are also hoping that a battle over the bureau can transcend bank regulation. “The public is paying attention,” said Adam Green, co-founder at the Progressive Campaign Committee, before leading a chant: “Hey, hey, ho, ho, Mick Mulvaney has got to go!” When asked whether the fate of the bureau will bleed into the 2018 midterm elections and become a campaign issue, Warren said, “Boy — it sure ought to be.” “This is not about politics,” Warren said. “This is about whose side you are on. Donald Trump said all during his campaign that he was going to be on the side of working people, that he was going to stand up to Wall Street, and he has done the world’s

“This is about Wall Street banks versus families and right now Donald Trump has put himself firmly on the side of Wall Street banks,” Sen. Elizabeth Warren said Tuesday during a protest in front of the CFPB. CFPB taking control of the agency. But Democrats have persisted in their efforts. With paint buckets drumming in the background and CFPB employees gazing through windows and taking pictures of protesters below, Warren and Jeff Merkley, D-Ore., led a rally Tuesday with progressive groups at the bureau’s headquarters, less than a block from the White House. “This is about Wall Street banks versus families and right now Donald Trump has put himself firmly on the side of Wall Street

biggest U-turn.” The issue may be resolved soon. District Judge Timothy J. Kelly will hold a hearing Tuesday afternoon to resolve the leadership conflict. Many predicted that English would lose. “She has a very tough case on the merits and the key requirement to get relief is a likelihood of success on the merits,” said Andrew Pincus, a partner at Mayer Brown and former assistant to the solicitor general at the Justice Department. While the case moves forward, Mulvaney

has been attempting to further the perception that he’s in control. Although he already has a Twitter account as head of the management and budget office, he created another one Tuesday describing himself as acting CFPB director.

Five big questions about Mulvaney-led CFPB By Kate Berry November 29, 2017 With leadership of the Consumer Financial Protection Bureau resolved by a federal court, the banking industry is eager to find out what interim head Mick Mulvaney plans to do once he gets a handle on the agency. Mulvaney, who is also the director of the Office of Management and Budget, has pledged to change direction at the CFPB, focusing less on new rules and more on easing access to credit. He has already instituted a 30-day hiring and policymaking freeze and is reviewing all rules and guidance, as well as pending enforcement actions and investigations. Though he has acknowledged that some final rules like the small-dollar payday lending rule are beyond his authority to change in the short-term, many in the industry believe otherwise and are gearing up to encourage him to change effective dates and reopen old rulemakings. The task ahead for Mulvaney will not be easy or quick, however. “An administrative agency can’t just repeal rules that are in effect by fiat, and it can’t ignore what Congress has instructed it to do,” said Warren Traiger, senior counsel at Buckley Sander. “An agency can’t just declare rules void; it needs to go through the same rulemaking process to amend or negate what’s out there, and that process has to withstand the standard of not being arbitrary or capricious.” The mortgage industry in particular wants clearer guidance from the CFPB on a

PAGE 8 host of mortgage regulations mandated by the Dodd-Frank Act. The bureau is required to review some of its rules within five years after they take effect, which presents Mulvaney and the industry with an opportunity to change course. “There will be tweaks to the rules overall, and opportunities for modifications to adjust issues of concern for the industry,” said Quyen Truong, a partner at Stroock & Stroock & Lavan, and a former CFPB assistant director and deputy general counsel. “Overall it would take some time before any major changes are made to the existing rules or new rules or guidelines are adopted. I don’t think that there will be major actions right away; there will be gradual modifications.” Following are five key questions now that Mulvaney is solidly in charge: Is Mulvaney going to be a figurehead and leave the day-to-day operations to someone else? Mulvaney told reporters this week that he would split his time between CFPB and OMB, working six days a week until President Trump can nominate a permanent successor who is confirmed by the Senate. But many observers believe he will hand the reins of day-to-day operations to a trusted lieutenant, given the fact that the Trump administration is facing a looming potential government shutdown. Senate Minority Leader Chuck Schumer and House Minority Leader Nancy Pelosi canceled a planned meeting with President Trump on Tuesday after the president said on Twitter that a budget deal was unlikely to happen. The two sides have until Dec. 9 to agree to a plan. As head of OMB, Mulvaney is expected to be actively involved in those talks, making it unlikely he will be able to devote much time to CFPB issues in the near term. But if he plans to appoint a lieutenant, it is not clear yet who that will be. Is the top management at the CFPB now working on borrowed time? Though Mulvaney instituted a hiring freeze, the Trump administration’s goal is to reduce the size of government agencies and eliminate regulations. Just as Secretary of State Rex Tillerson has announced plans to cut his agency by at least 30% and Scott Pruitt, the head of

AMERICAN BANKER the Environmental Protection Agency, has reassigned scientists and academics at the EPA, so too is Mulvaney expected to take the ax to what he considers a bloated bureaucracy. Since most CFPB senior managers are not part of the agency’s union, that makes them vulnerable to being ousted. Moreover, if they are suspected of being loyal to former director Richard Cordray, Mulvaney will have extra incentive to get rid of them. There are three ways to get rid of employees at the CFPB: firing individuals for cause, instituting a reduction in the workforce or reassigning senior managers to different jobs. No one is expected to be fired on the spot, said one former top CFPB official. More likely, Mulvaney or his lieutenants will sit down with managers and explain that they can keep their jobs if they are on board with the new regime, or be reassigned and stripped of their portfolio of duties. Will the CFPB reopen the payday rule? Though Mulvaney has said he cannot change rules that have already been finalized, he could change the effective date of a rule or reopen it for public comment. Some expect that will happen with the recently finished small-dollar lending rule, which has a 20-month lead time before it goes into effect. Mulvaney may also urge lawmakers to repeal the rule, which is expected to upend the payday lending business. In October, the Senate repealed the CFPB arbitration rule after Keith Noreika, then the acting head of the Office of the Comptroller of the Currency, released data claiming it would be harmful to consumers. The arbitration rule was repealed with a tie vote cast by Vice President Mike Pence. The politics of overturning the payday lending rule are trickier, however. Republicans were barely able to manage the votes to overturn the rule banning mandatory arbitration clauses in financial clauses for fear of appearing to be too close to the financial services industry. Many GOP lawmakers are expected to be reluctant to publicly support payday lenders, which have a bad reputation among much of the public.

A public appeal from the acting CFPB director could give them some cover, but it may not be enough. Ultimately, Mulvaney could give Congress time to take his own action if lawmakers don’t move forward. Will the CFPB delay implementation of the Home Mortgage Disclosure Act rules? The Dodd-Frank Act required the mortgage industry to collect and report certain data on every mortgage including the ethnicity, race and sex of potential borrowers. The mortgage industry has spent years modernizing systems to meet a January 2018 deadline for new Home Mortgage Disclosure Act reporting. That is unlikely to change. “I would be very surprised if there were any changes or delays to implementation of the new HMDA collection and reporting requirements,” Traiger of Buckley Sander said. “Especially for the many lenders who have invested millions in implementing the new rule, it would create a lot of operational headaches.” But lenders are also concerned about the CFPB’s plans to make the vast majority of HMDA data public, beginning in 2019 (aggregate data is already public, but this would go further). That is one area ripe for change. In September, the CFPB proposed excluding 11 data points, such as property addresses and credit scores, from being publicly disclosed, primarily to protect consumers’ privacy and to make sure consumers cannot be individually identified. Financial institutions are concerned that consumer advocates or media outlets would use the data to look at mortgage approval rates to allege discrimination against banks and lenders. “It’s certainly possible that the change in leadership at the CFPB could impact what is ultimately released to the public in 2019,” Traiger said. What’s the plan for the CFPB’s proposals on debt collection? The CFPB began work in 2013 to fix abuses in the debt collection market after widespread complaints by consumers. Due to issues in the governing statutes, the CFPB split its plan into two parts: one governing first-party and the other handling third-party debt collectors.


Of the two plans, only the latter has made the light of day. That plan drew criticism because it would have made third-party debt collectors responsible for the accuracy of information on consumer debts. In June, the CFPB announced it would drop that provision, leaving the originators of debt on the hook for the accuracy of information. But the agency has been mum since. Moreover, it is no longer clear if it intends to move forward with either the third-party or first-party proposals, and it may ultimately choose to drop the matter entirely.