Succession battle at U.S. financial agency seen headed to courts

Published 26/11/2017 in Politics

Succession battle at U.S. financial agency seen headed to courts
Office of Management and Budget Director Mick Mulvaney attends the daily briefing at the White House in Washington, U.S., July 20, 2017. REUTERS/Carlos Barria

WEST PALM BEACH, Fla./WASHINGTON (Reuters) – A battle between the White House and Democrats over warring appointments to head up the top U.S. regulator for consumer finance is likely headed for the courts, opening any interim actions by the agency to legal challenges, lawyers said on Saturday.

Richard Cordray, a Democrat, stepped down on Friday as director of the Consumer Financial Protection Bureau (CFPB), which was created after the financial crisis to protect consumers from abusive lending practices, and he named staffer Leandra English as acting director.

A few hours later, President Donald Trump named someone else to lead the agency: Mick Mulvaney, the White House budget director and one of the CFPB’s fiercest critics.

The CFPB, the brainchild of Senator Elizabeth Warren, a Democrat and a liberal firebrand, has long been in the crosshairs of Republicans, who say it has had too much unchecked power.

On Saturday, Trump tweeted that the CFPB – which has imposed steep penalties on banks, auto dealers, student lenders and credit card companies for predatory lending practices – had “devastated” financial institutions.

Democrats and Republicans agree that Trump may nominate a permanent CFPB chief, but they disagree over who may lead the agency in the interim, a dispute which could drag on for months until the Senate confirms a permanent Trump appointment.

The dispute is over which federal law prevails in naming an interim director. According to Democrats, the relevant law is the 2010 Dodd-Frank Wall Street reform law that created the CFPB, which stipulates that the agency’s deputy director is to take over in the short term.

Cordray, in announcing his resignation on Friday, said he had named English as deputy director and that she would become the acting director.

But administration officials say the 1998 Federal Vacancies Reform Act gives the president the power to temporarily fill agency positions, except for those with multi-member boards – an exemption they said did not apply to the CFPB.

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Industry critics said the succession battle underlined that the agency lacks proper Congressional oversight.

“The CFPB’s current governing structure is a dictatorship, period,” Richard Hunt, head of the Consumer Bankers Association, a trade group for retail banking, said in a statement.

Democrats and consumer advocates said it was unfair and inappropriate to put Mulvaney – who once described the CFPB as a “joke” – in charge.

Maxine Waters, the top Democrat on the House of Representatives’ Financial Services Committee, said Mulvaney would have too much power, as the CFPB director also sits on the boards of two other financial regulatory agencies.

“The White House would have an alarming degree of direct control over financial regulation, supervision, and enforcement,” Waters said in a statement.

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