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  • Seventeen State AGs Express Mulvaney Concerns to Trump and Emphasize AG Consumer Protection Authority

    State Issues

    On December 12, seventeen state attorneys general sent a letter to President Trump expressing concern about OMB Director Mulvaney leading the CFPB. The AGs emphasize Mulvaney’s past criticisms of the Bureau as evidence that Mulvaney should be disqualified from the position, even in the acting capacity. Notably, the AGs stress their statutory authority to enforce state and federal consumer protection laws, noting they “will continue to enforce those laws vigorously regardless of changes to CFPB’s leadership or agenda.” They go on to state that if the CFPB does not do the job, the states will “redouble our efforts at the state level to root out such misconduct and hold those responsible to account.”

    The letter, led by New York AG Eric Schneiderman, was signed by the following state AGs: California, Connecticut, District of Columbia, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Mexico, North Carolina, Oregon, Vermont, Virginia, and Washington State.

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  • English Litigation Continues as Mulvaney Delays CFPB Enforcement Cases and Lawmakers Begin New Payday CRA Action

    Federal Issues

    On December 6, Deputy Director of the CFPB, Leandra English, filed an amended complaint for declaratory and injunctive relief and a motion for preliminary injunction with a supporting memorandum. In her amended complaint, English adds, among other things, a constitutional claim alleging that President Trump’s appointment of Mulvaney violates Article II, section 2 of the U.S. Constitution, which empowers the President to appoint “Officers of the United States,” subject to “the Advice and Consent of the Senate.” According to English, since Mulvaney was appointed without Senate approval and the Federal Vacancies Reform Act (FVRA) allegedly does not provide the President with a separate authority, President Trump does not have the constitutional authority to appoint Mulvaney in the manner he chose.

    The amended complaint also alleges that the appointment of Mulvaney under the FVRA is illegal because that act cannot be used to make an appointment to an “independent multi-member board or commission without Senate approval,” and the CFPB Director is, by law, a member of the FDIC’s board. This argument mirrors the argument made in a new complaint filed on December 5 by a New York-based credit union against President Trump and Acting CFPB Director Mick Mulvaney in the U.S. District Court for the Southern District of New York to contest the legality of Mulvaney’s appointment. The defendants have yet to respond to the credit union’s complaint.

    With respect to English’s litigation, the defendants are set to respond to the motion for preliminary injunction, which builds off the arguments in the amended complaint, by December 18, and a hearing on the motion is set for December 22.

    Mulvaney has continued his work as Acting Director at the CFPB. On December 4, according to sources, he met with reporters to announce his decision to delay at least two active litigation cases as part of his plan to reevaluate the Bureau’s enforcement and litigation practices. The first case concerns a district court dispute between the Bureau and an immigration bond company over whether the CFPB has the authority to enforce a civil investigative demand for personal information about the company’s customers. The second case involves Mulvaney’s decision to withdraw the Bureau’s demand that a mortgage payment company post bond after being ordered to pay a $7.9 million civil money penalty (see previous InfoBytes coverage here). Mulvaney’s December 4 statements also included a freeze on the Bureau’s collection of consumers’ personally identifiable information. These actions follow directions issued by Mulvaney during his first week at the Bureau as previously covered by InfoBytes here.

    Mulvaney has also suggested that he would not seek to repeal the Bureau’s final rule concerning payday loans, vehicle title loans, deposit advance products, and longer-term balloon loans but expressed his support for resolution H.J. Res. 122, which was introduced December 1 by a group of bipartisan lawmakers to override the rule under the Congressional Review Act (CRA).  The final rule is set to take effect January 16, 2018, but compliance is not mandatory until August 19, 2019. A press release issued by the House Financial Services Committee in support of the resolution stated, “small-dollar loans are already regulated by all 50 states, the District of Columbia and Native American tribes. The CFPB’s rule would mark the first time the federal government has gotten involved in the regulation of these loans.”

    On December 5, the Government Accountability Office (GAO) issued a letter to Senator Pat Toomey (R-Pa.) stating that CFPB Bulletin 2013-02 (Bulletin) on indirect auto lending and compliance with the Equal Credit Opportunity Act (ECOA) is a “general statement of policy and a rule” that is subject to override under the CRA. According to GAO, the CRA’s definition of a “rule” includes both traditional rules, which typically require notice to the public and an opportunity to comment, and general statements of policy, which do not. GAO concluded that the Bulletin meets this definition “since it applies to all indirect auto lenders; it has future effect; and it is designed to prescribe the Bureau’s policy in enforcing fair lending laws.” GAO’s decision may allow Congress to repeal the four year old Bulletin through a House and Senate majority vote under the CRA, followed by the President’s signature. Sen. Toomey issued a statement saying, “I intend to do everything in my power to repeal this ill-conceived rule using the [CRA].”

    Additionally, and as expected, on December 5, former Director Richard Cordray officially announced his candidacy for governor of Ohio.

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  • Mulvaney Completes First Week as Acting Director of CFPB

    Federal Issues

    In his first week at the Bureau, Mulvaney ordered freezes on hiring and any new regulations for 30 days, and also announced a halt to payouts from the enforcement fund. It is also reported that Mulvaney has put new enforcement actions on hold as he reviews on-going matters. Additionally, on December 1, the White House appointed Brian Johnson, an aide to House Financial Services Committee Chairman Jeb Hensarling (R-Texas), to assist Mick Mulvaney in his role as the Acting Director of the CFPB. Johnson was a featured speaker at Buckley Sandler’s CFPB Today conference at the end of October.

    As previously covered by InfoBytes, Judge Timothy Kelly, denied CFPB Deputy Director Leandra English’s  request for a temporary restraining order preventing Mulvaney from acting as the Acting Director. English is expected to continue the litigation; a briefing schedule is due in the case by December 1.

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  • Court Denies Restraining Order Preventing Mulvaney’s Appointment

    Federal Issues

    On November 28, Judge Timothy Kelly denied a request by Leandra English, who was appointed Deputy Director of the CFPB by Richard Cordray on the same day as his resignation, for a temporary restraining order preventing the President from appointing anyone other than English as Acting Director and preventing Mick Mulvaney from serving as the Acting Director (see previous InfoBytes coverage for details).

    English’s counsel, in remarks to reporters outside the courtroom, stated they may seek an appeal, may move for a preliminary injunction, or may move for an expedited final decision on the merits.

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  • Legal Battle Begins Over Mulvaney Appointment as Acting Director of CFPB

    Federal Issues

    On November 26, the newly appointed Deputy Director of the CFPB, Leandra English, filed a lawsuit in U.S. District Court for the District of Columbia against President Trump and Mick Mulvaney, the Director of the Office of Management and Budget (OMB), seeking declaratory judgments that English is the Acting Director of the CFPB – and Mulvaney is not – as well as emergency temporary restraining orders preventing the President from appointing anyone other than English as Acting Director and preventing Mulvaney from acting as the Acting Director.

    The legal action results from the November 24 resignation of Richard Cordray as the Director of the CFPB and his naming of English as the Bureau’s Deputy Director (previously covered by a Buckley Sandler Special Alert) citing to section 1011(b)(5) of the Dodd-Frank Act (DFA), which provides that the CFPB’s Director may appoint the Deputy Director who “shall…serve as acting Director in the absence or unavailability of the Director.” Following Cordray’s official resignation, the White House issued an announcement appointing Mulvaney as Acting Director under the Federal Vacancies Reform Act of 1998 (FVRA).

    On November 25, the Department of Justice (DOJ) Office of Legal Counsel released a memorandum in support of the President’s authority to designate Mulvaney as the Acting Director of the Bureau under the FVRA. According to the DOJ, while Congress recognized there would be cases in which FVRA was not the “exclusive means” for succession, Congress did not intend for the FVRA to be “unavailable” when another statute provides an alternative for succession. Accordingly, the DOJ asserts that, notwithstanding the succession provision in the DFA, FVRA gives the President the authority to, “rely upon it in designating an acting official in a manner that differs from the order of succession otherwise provided by an office-specific statute.” In her complaint, English argues that the succession provision in the DFA controls over the FVRA and that the appointment of a White House official is inconsistent with the CFPB’s independent structure.

    Similarly, on November 25, the General Counsel for the CFPB, Mary Mcleod, issued a statement to the senior leaders of the Bureau concurring with the DOJ’s conclusion that “the President may use the [FVRA] to designate an acting official, even when there is a succession statute under which another official may serve as acting.” Mcleod concluded that Mulvaney is the Acting Director of the CFPB and encouraged all Bureau staff to act consistently with that conclusion.

    Oral arguments on English’s emergency motion were held on November 27 by Judge Timothy Kelly, a Trump appointee. Judge Kelly did not rule on the motion and granted the government’s request to file papers responding to English’s arguments.

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  • Trump to Select Mulvaney as Interim CFPB Director

    Federal Issues

    According to media sources, President Trump is expected to select Mick Mulvaney, the current Director of the White House Office of Management and Budget (OMB), to serve as the interim Director of the CFPB upon Richard Cordray’s resignation at the end of this month. Mulvaney would keep his current position and serve as both the Director of OMB and Acting Director of the CFPB throughout the interim term.

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