Constitution Daily

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The constitutional issues in the CFPB conflict

November 28, 2017 by Ugonna Eze


A conflict between President Trump and the nation’s top consumer watchdog has triggered a minor constitutional crisis over who will lead the organization.

Richard CordrayThe Consumer Financial Protection Bureau (CFPB) is an independent commission that was established by the 2010 Dodd-Frank Act. The CFPB was formed in the wake of the 2008 financial crisis to oversee and regulate the financial sector, with the express intent of protecting consumers. On November 24, Richard Cordray (left), its first director, announced his resignation from the CFPB and appointed his chief of staff, Leandra English, to serve in his stead as Deputy Director of the CFPB. President Trump, in turn, appointed Mick Mulvaney, the Director of the Office of Management and Budget (OMB) to serve as Interim Director of the CFPB until the Senate can confirm a new replacement. Both Mulvaney and English claim that they are the legitimate interim director of the CFPB, yet only one of them can hold that post.

Supporters of the President point out that the 1998 Federal Vacancies Reform Act (FVRA) states that if the head of an executive agency resigns or cannot perform the duties of his office, the President can appoint his replacement – provided that the replacement is someone who has already been confirmed with the advice and consent of the Senate. Mick Mulvaney is currently the Director of the White House Office of Management and Budget (OMB), a position that requires a Senate confirmation vote to hold. As Adam White notes at the Yale Journal on Regulation, Section 3347 of the FVRA provides that the FVRA is “the exclusive means for temporarily authorizing an acting official to perform the functions and duties of… an executive agency” unless another statute expressly designates otherwise.

Daniel Hemel also notes at the Yale Journal on Regulation that, “The Federal Vacancies Reform Act is a ‘Federal law dealing with . . . officers.’ So the question is whether Dodd-Frank or any other statute ‘provide[s] expressly’ that the Federal Vacancies Reform Act shouldn’t apply to the CFPB. Perhaps 12 U.S.C. § 5491(b)(5)(B) implies that it, and not the Federal Vacancies Reform Act, should govern in the event of the director’s departure. But ‘expressly’ means ‘directly, firmly, and explicitly.’ And the Dodd-Frank Act does not directly, firmly, or explicitly say that the Federal Vacancies Reform Act is inapplicable to the CFPB.”

Supporters of former CFPB Director Richard Cordray and his chief of staff Leandra English point to the language of the 2010 Dodd-Frank Act, which holds that the deputy director of the CFPB “shall” serve as acting director in the absence of the Director. Since Cordray appointed English as his deputy before his resignation, his supporters argue, English should serve as the acting director. Supporters of this view believe that this provision of the Dodd-Frank act was written with the intention of displacing the FVRA.

Marty Lederman notes in Balkanization that, “The fairly straightforward argument on the other side—and it’s a fairly compelling one—is that the later-in-time Congress spoke unequivocally in 2010, providing that the Deputy Director ‘shall serve’ as acting Director. Dodd-Frank does not say that she ‘may’ serve. It doesn’t even say, as other statutes do, that she ‘shall serve’ unless and until the President appoints someone else to do so… In such cases of an unequivocal, mandatory statutory designation of the acting officer, the argument goes, the President may not exercise his appointment authority under the VRA, because Congress itself has already settled the question of who serves.”

The challenge for constitutional scholars (and very soon, judges) lies in deciding which statute should take precedence. Those who believe that the Dodd-Frank Act displaces the FVRA – and therefore, that English should sit as CFPB interim director – rely on a theory of statutory construction that says that when two statutes conflict, the more specific statute should be given greater strength (see United States v. Estate of Romani (1998)). They also point out that the independence of the CFPB’s structure mirrors that of the SEC’s Public Company Oversight Board, which was upheld by the Supreme Court in Free Enterprise Fund v. Public Company Oversight Board (2010).

But those who believe that the FVRA applies – and therefore, that Mulvaney should sit as CFPB interim director – rely on a theory of statutory interpretation that says that facially contradictory statutes should be interpreted in a way that best allows them to coexist (see JEM Ag Supply v. Pioneer Hi-Bred Int’l (2011)). They also hold that the Supreme Court has historically established a presumption against repeal by implication (see Morton v. Mancari (1974); Pittsburgh & Lake Erie R.R. v. Railway Labor Executives’ Ass’n (1989). The only way to interpret the tension between the FVRA and Dodd-Frank, the argument goes, is to hold that English can serve as interim director unless the President chooses a Senate confirmed interim director to hold the seat.

This is not the first time, of course, that the CFPB has faced constitutional issues over its structure. The CFPB’s power to enact civil enforcement was challenged in Gordon v. CFPB, a Ninth Circuit case that was denied a hearing at the Supreme Court. In PHH Corp. v. CFPB (D.C. Cir. 2016), which is currently being argued in en banc appeal, the constitutionality of the CFPB’s structure – with a single director at the top with extensive power – was challenged. English is currently suing the administration in the District of Columbia Circuit Court, claiming that she should sit as interim director. The current standoff between Mulvaney and English likely will not be the last constitutional challenge that the CFPB will face. 

Ugonna Eze is a Fellow for Constitutional Studies at the National Constitution Center.


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