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CFPB leadership struggle PAGE 2 AMERICAN BANKER

sor at the University of Utah’s S.J. Quinney Sandler, chairman and executive partner at Leadership College of Law and a former CFPB special Buckley Sandler. “It’s a real legal issue.” adviser to Cordray. “This is uncharted ter- Democrats had already staked out the ritory.” position that Dodd-Frank trumps the Feder- clash at CFPB At issue is the language of Dodd-Frank, al Vacancies Reform Act. which says that the bureau’s deputy direc- “Ms. English should be allowed to serve continues tor will serve as acting CFPB director in the as Acting Director until a Director is con- “absence or unavailability of the director.” firmed by the full Senate, consistent with That is different from the earlier Feder- the process articulated in the law that creat- as two claim al Vacancies Reform Act, which generally ed the Consumer Bureau,” said Rep. Maxine gives the president the power to appoint Waters, D-Calif., the top Democrat on the mantle any Senate-confirmed individual to the House Financial Services Committee. temporary leadership of an independent Regardless, the Trump administration By Kate Berry and Ian McKendry agency. moved forward anyway with plans to ap- November 24, 2017 The White House said Saturday that the point Mulvaney, saying the president “looks WASHINGTON — Two people are now Federal Vacancies Reform Act takes prece- forward to seeing Director Mulvaney take a claiming to be the rightful leader of the Con- dence over the CFPB’s statute. common sense approach to leading the CF- sumer Financial Protection Bureau. “The Vacancies Act is also there as a way PB’s dedicated staff.” CFPB Director Richard Cordray’s final act that the president can supersede the way The White House said the Office of Le- to appoint his own interim successor be- those agencies statutes work,” said a senior gal Counsel has already weighed in on the fore stepping down — Leandra English, the administration official. “To us this seems matter and determined that Mulvaney can agency’s chief of staff — came hours before like a pretty clear-cut legal question.” lead the agency. But that is not clear, law- the Trump administration named Office The administration released a Justice De- yers said. of Management and Budget Director Mick partment memo late Saturday that justified “It will take some time to sort this out Mulvaney as the temporary director. its move. since the outcome won’t be determined un- It is now unclear who is legally entitled to But lawyers said the question of wheth- til the case has been appealed and decided the job, and both appear likely to show up er Dodd-Frank, which was more recently by the Court of Appeals and, perhaps, the Monday to claim the mantle. enacted, supersedes the Federal Vacancies U.S. Supreme Court,” said Alan Kaplinksy, a For its part, the Trump administration Reform Act will likely be challenged. The partner at Ballard Spahr. “In the meantime, insisted Saturday that Mulvaney was in Trump administration also argues that Cor- I suspect things at the CFPB will grind to a charge, claiming that English, now the dep- dray’s voluntary departure doesn’t count as screeching halt.” uty director of CFPB, works for him. an “absence or unavailability.” The issue not only impacts the CFPB. By “Director Mulvaney will be the acting di- “The question turns on whether resig- law, the director of the consumer bureau rector and will take up his office at the CFPB nation means unavailability,” said Andrew has a seat on the Federal Deposit Insurance and begin overseeing the CFPB” on Mon- day, 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 ad- ministration in another difficult court chal- The Trump administration named Office of Management and Budget Director Mick Mulvaney as lenge,” said Christopher Peterson, a profes- acting director of the Consumer Financial Protection Bureau. AMERICAN BANKER PAGE 3

Corp. board as well as a seat on the Finan- the Senate and the White House and they President Trump to halt the Mulvaney ap- cial Stability Oversight Council. can nominate and process through the Sen- pointment. The CFPB’s press office did not return ate their nominee,” Calhoun said. English was appointed deputy director multiple requests for comment. Richard Hunt, president and chief exec- on Friday as CFPB Director Richard Cor- Until Friday, there had been no perma- utive of the Consumer Bankers Association, dray stepped down, a role that would serve nent deputy director at the CFPB. The job said that, regardless, Trump will eventually as acting director in the absence of a Sen- was filled by David Silberman, the agency’s wrest control of the bureau. ate-confirmed leader. But hours later, Presi- associate director of research, markets and “At the end of the day there will be a Re- dent Trump named Mulvaney as the acting regulation, on an acting basis. But on Fri- publican running that place, whether it’s director, leaving it unclear which of the two day, Cordray declared that English would Monday, or February or June,” Hunt said, was the lawful head of the CFPB. be the new deputy director, and he speci- “and Cordray’s last action will only infuriate English has been in the unenviable po- fied she would be in charge after he left lat- Republicans more to eliminate the CFPB.” sition of having to decide whether she will er that day. Updated November 25, 2017 at 12:00PM: sue the president on what would be just her “In considering how to ensure an orderly This story is being constantly updated second day in the job. The lawsuit seeks a succession for this independent agency, I based on new information. Please check quick judgment from the court as well as determined that it would be best to avoid back frequently for the latest information. a temporary block to Mulvaney’s appoint- leaving this key position filled only in an ment. American Banker reported earlier acting capacity,” Cordray wrote in a letter Sunday that a lawsuit by English was in the to staff on Friday. “In consultation over the offing. past few days, I have also come to recognize CFPB’s In a statement, Sarah Huckabee Sanders, that appointing the current chief of staff to the White House press secretary, said “the the deputy director position would mini- English law is clear: Director Mulvaney is the acting mize operational disruption and provide director of the CFPB.” for a smooth transition given her operation- She specifically cited the memo by Mc- al expertise.” sues Trump Leod that said the Mulvaney appointment English has previously held leadership was legitimate. positions at the CFPB, the Office of Manage- administration “Now that the CFPB’s own general coun- ment and Budget and the Office of Person- sel — who was hired under Richard Cordray nel Management. — has notified the bureau’s leadership that Cordray’s move was panned by industry to block she agrees with the administration’s and representatives and praised by consumer [the Justice Department]’s reading of the advocates. Mulvaney law, there should be no question that Direc- Some said it reinforced Republican argu- tor Mulvaney is the acting director,” Sand- ments that the CFPB’s single-director struc- ers said. “It is unfortunate that Mr. Cordray ture is unconstitutional, a key issue current- appointment decided to put his political ambition above ly being decided by a federal appeals court. By Kate Berry the interests of consumers with this stunt.” “Today’s actions by former CFPB Direc- November 26, 2017 Still, the issue is likely to remain in flux tor Richard Cordray in appointing his own Leandra English, the deputy director of until a court makes a decision. acting director to lead the bureau reinforc- the Consumer Financial Protection Bureau, “The legal issues are complex enough es the problematic nature of having a sin- sued the Trump administration late Sunday that the leadership of the bureau is likely to gle and completely unaccountable leader,” to block the appointment of Office of Man- remain uncertain until a court definitively said Chris Stinebert, president and CEO of agement and Budget Director Mick Mul- resolves it,” said Christopher Peterson, a American Financial Services Association, vaney as interim director of the consumer law professor at the University of Utah’s S. J. an industry trade group. agency. Quinney College of Law, and a former CFPB But consumer groups said Cordray was The lawsuit was filed by English herself, special adviser to Cordray. acting within his rights. not the CFPB, which took the official posi- English’s lawsuit delves into two distinct “There are two schools of thought,” said tion that Mulvaney is in charge. The agen- legal areas. The first is a statutory conflict Mike Calhoun, president of the Center for cy’s general counsel, Mary McLeod, drafted between the Dodd-Frank Act and the Fed- Responsible Lending. “We believe that the a memo late Sunday supporting the Trump eral Vacancies Reform Act over who has the Dodd-Frank Act specifically provides that administration’s position. “I advise all Bu- right to appoint an interim successor at the it’s the deputy director” that leads the CFPB reau personnel to act consistently with the agency. in the interim. understanding that Director Mulvaney is The second legal argument, which has re- Calhoun said President Trump should go the acting director of the CFPB,” McLeod ceived less attention, is whether the White through the normal process of nominating wrote. House is trying to improperly assume con- a CFPB director who can be confirmed by The lawsuit , English v. Trump, was filed trol of an independent agency by naming the Senate. in the U.S. District Court for the District of Mulvaney, who reports directly to the presi- “The Republicans control Congress and Columbia, seeking an injunction ordering dent and has the status of a Cabinet-ranked PAGE 4 AMERICAN BANKER position as head of OMB. by the Senate and can only fire the director a CFPB director. “The President may not, consistent with “for cause.” But some outside lawyers said the admin- the statutory requirement of independence, “Those are his powers; that’s it,” said Pe- istration has a strong case. install a still-serving White House staffer as terson. Andrew Hessick, a law professor at the the acting head of an independent agency— To be sure, the CFPB has been headed by University of North Carolina School of Law, particularly when doing so would displace a Cabinet official in the past. When it was said he was not aware of any statute that an acting head who has a clear legal entitle- created in 2011, then-Treasury Secretary prohibits dual appointments. ment to the position,” the lawsuit says. Timothy Geithner played a role in setting “This is a special action when two peo- Naming Mulvaney to head the CFPB up the agency. But that was allowed under a ple are claiming the same office and how while he also reports directly to President special statutory section in Dodd-Frank and the courts resolve it,” Hessick said. “There Trump is akin to naming a senior adviser at only applied to setting up and launching the might be a lawsuit filed and almost certain- the White House to simultaneously be chair agency. ly the president’s position will win because of the Federal Reserve Board, Peterson said. The Trump administration has only tak- his argument is pretty good, and even out- “The reason the Fed is an independent en a position so far on the first legal argu- side the law, the president has an awful lot agency within the executive branch is that ment, saying that the Vacancies Reform Act of power when it comes to these kinds of Congress wanted the Fed’s monetary policy gives the president broad discretion on ap- appointments, and he and Congress can decisions to be separate from politics,” Pe- pointments. makes life miserable for the CFPB.” terson said. The White House said Saturday that the In her memo, the CFPB’s McLeod said The director of the CFPB is also supposed Federal Vacancies Act takes precedence the battle over the wording of Dodd-Frank to be shielded from politics because of the over language in Dodd-Frank, which says wasn’t important. judicial and law enforcement functions of that the bureau’s deputy director will serve “The statutory language, legislative histo- the job, which involve filing enforcement as acting CFPB director in the “absence or ry, precedent from the Office of Legal Coun- actions and deciding appeals. unavailability of the director.” It released a sel at the Department of Justice, and case “It’s true that Congress demonstrated an Justice Department memo late Saturday de- law all point to the conclusion that the Pres- intent in the Dodd-Frank Act for the bureau tailing its legal justification for the move. ident may use the Vacancies Reform Act to to be independent and having someone run Outside lawyers are divided on the mat- designate an acting official, even when there the agency who reports directly to the exec- ter. Laurence Tribe, a constitutional law is a succession statute under which another utive office of the president goes against the professor at Harvard Law School, said in a official may serve as acting,” she wrote. “As notion of independence,” said Jenny Lee, a tweet that Trump is “100% wrong on who General Counsel for the Bureau, it is my le- partner at Dorsey & Whitney. steps into Cordray’s shoes,” based on the gal opinion that the President possesses the The Dodd-Frank Act, which created the history and drafting of Dodd-Frank. He was authority to designate an acting director for CFPB, explicitly specified the role of the supported by former Rep. Barney Frank, the Bureau.” president. It states that the president can D-Mass., who told news outlets that con- Historically courts resolve this type of nominate a CFPB director who is confirmed gressional intently clearly gave the power to dispute through a ruling on a writ of quo warranto, a special form of suit used to re- solve 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 Dem- ocrat 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 fam- ilies against financial abuse until a perma- nent Director is confirmed by the Senate,” Brown said. English has served as the CFPB’s chief of staff, deputy chief operating officer, as well Part of the suit against OMB Director Mick Mulvaney’s appointment says he cannot be director as acting and deputy chief of staff. because he already reports directly to the president. She had been a principal deputy chief AMERICAN BANKER PAGE 5 of staff at the Office of Personnel Manage- said. “Rumors that I will set the place on fire agency. ment, the chief of staff and senior adviser or blow it up or lock the doors are false. I’m “The Dodd-Frank Act is very, very clear to the deputy director for management at a member of the executive branch of gov- that it establishes an” independent agency, the White House Office of Management and ernment. We execute the law.” said Deepak Gupta, a partner with Gupta Budget, and was a member of the CFPB im- Still, it would be run differently, he said. Wessler who is representing English. plementation team at the Treasury Depart- “That being said, the way we go about it, Lawyers for the administration cited ment during the Obama administration. the way we enforce it, the way we interpret analysis by the Justice Department and the English retained Deepak Gutpa, the it, will be dramatically different under the CFPB’s general counsel that Mulvaney was founding principal of Gutpa Wessler, a bou- current administration than it was under the rightful interim director of the consum- tique law firm that specializes in Supreme the last,” Mulvaney said. “Anybody who er bureau. Court, appellate and complex litigation on thinks that a Trump administration’s CFPB Both sides said a decision needed to be constitutional and consumer rights issues. would be the same as the Obama adminis- made soon. tration’s CFPB is being naive. Elections have Meanwhile, 25 congressional Democrats consequences at every agency, and that in- — including Senate Minority Leader Chuck cludes the CFPB.” Schumer of New York, House Minority Mulvaney His comments come as a legal battle con- Leader Nancy Pelosi of California and Sen. tinues to be waged over the legality of his Elizabeth Warren of Massachusetts — as well pledges appointment. Leandra English, the deputy as former Democratic Rep. Barney Frank director of the CFPB, filed suit late Sunday filed an amicus brief Monday night support- claiming that she, not Mulvaney, was the le- ing English’s claim as the acting leader of ‘dramatic’ gal acting head of the bureau. the agency. District Judge Timothy J. Kelly held a “Whether the White House likes it or not, shift at CFPB, hearing on the matter late Monday, but said the law mandates that Deputy Director Le- the Trump administration needed more andra English serve as Acting Director of time to respond before he could issue a rul- the Consumer Financial Protection Bureau freezes rules ing. until the Senate confirms a new, permanent These are “important and complicated Director,” Pelosi said in a statement. and hiring issues,” Kelly said. English also drew support from former English argues that the Dodd-Frank Act, CFPB Director Richard Cordray, who had By Rob Blackwell and Ian McKendry which created the CFPB, specifically allows appointed her as deputy director before November 27, 2017 the director of the agency to name an in- announcing his resignation Friday. In an WASHINGTON — The Trump administra- terim director. Her lawyers also argued interview on MSNBC Monday night, Cor- tion’s pick as acting director of the Consum- that Mulvaney is not distant enough from dray said the law was “clear” that “the dep- er Financial Protection Bureau said Mon- the administration to run an independent uty director shall act as the director until day 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 consum- ers without cutting off access to financial services. At the outset, he said he has in- stituted a 30-day hiring and policymaking freeze while he reviews all rules and guid- ance still pending before the agency. But he acknowledged some items already out the door, such as the final rule to restrict short- term lending, are beyond his purview to stop. Though he sounded almost reluctant about it at times in a press briefing with re- porters, Mulvaney said the agency would continue operations as normal, but with a twist. “I was just learning about the powers that I have as acting [CFPB] director - they would frighten “The agency will stay open,” Mulvaney most of you,” said OMB Director Mick Mulvaney. PAGE 6 AMERICAN BANKER a nominee is presented to the Senate and preferred to have consumer protection also appeared surprised, scrambling to of- confirmed.” functions stay with other government agen- ficially name Mick Mulvaney, the director “This is the kind of a disagreement that cies as they were previously prior to Dodd- of the Office of Management and Budget, involves two different laws. They conflict Frank. as interim director. English and Mulvaney with one another,” Cordray said. “The right He also took the CFPB to task for failing have been engaged in a legal standoff since place to hash that out is in the courts, which to uncover problems at Wells Fargo last Sunday night over control of the bureau. is where it is right now. It shouldn’t be decid- year. Though the agency took a joint en- In interviews, several current and for- ed by name-calling and tweets and insults. forcement action against Wells related to its mer CFPB officials, most of whom did not It should be decided by people presenting employees opening potentially millions of want to speak on the record, were upset their arguments and a judge thinking it over phony accounts, Mulvaney questioned why by Cordray’s eleventh-hour move during a … and it will ultimately be resolved.” it hadn’t been detected sooner. holiday weekend, typically a time when the During his press briefing, Mulvaney dis- “I am disturbed by what happened at only news that is released is the kind people puted the idea that his appointment was Wells Fargo,” he said. “My question is: Why want to bury. They were also angry at his improper because he was also a Cabinet of- did [the CFPB] miss it?” choice, arguing that English was not experi- ficial, insisting that the job always answers Overall, he said his goal was to change enced enough for the job. to the president. He noted that former Trea- the way the agency enforced consumer pro- “It was shocking to people that English sury Secretary Timothy Geithner helped set tection laws. was selected,” said one former CFPB em- up the CFPB when it was created by the President Trump “wants me to fix it,” ployee, who spoke on the condition of ano- Dodd-Frank Act before the Obama admin- Mulvaney said. “He wants me to get it back nymity. “Many people were questioning Le- istration chose Cordray as the agency’s first to the point that it can protect people with- andra’s qualifications and her experience. director. out trampling on capitalism, without chok- It’s symptomatic of the environment at the “This is how it’s been done here,” Mul- ing off the access to financial services that CFPB where they just handpick whomever vaney said. “I will be as closely tied to are so critical to so many folks, and so many they want and this cronyism and favoritism Donald Trump as president as Secretary folks in the lower and middle classes.” leads to discrimination.” Geithner and Mr. Cordray were to President Senate Democrats, meanwhile, contin- Little is known about English. Previous- Obama. I don’t think it’s anything different.” ued to sharply criticize the appointment, ly, she worked as a principal deputy chief (The Dodd-Frank Act specifically gave saying it was unlawful and improper. War- of staff at the Office of Personnel Manage- the power to the Treasury secretary to set ren and Schumer held a joint appearance ment, the chief of staff and senior adviser up the bureau, but that part of the law no with English to support her. to the deputy director for management at longer appears to apply in this case.) “Right now we need the courts to play OMB, and was a member of the CFPB im- Mulvaney said he would work three days this out,” Warren told reporters. “President plementation team at the Treasury Depart- a week at CFPB and three days a week at Trump has put a cloud over the agency by ment during the Obama administration. OMB. He also stood by his past criticisms invoking a statute that doesn’t apply here.” But she’d only formally served as the of the CFPB, which he once described as agency’s chief of staff since January, and has “sick” and “sad.” never been subjected to the kind of public “My opinion of the CFPB has not scrutiny that comes from holding a top-lev- changed,” he said. “I still think it’s an aw- At CFPB, bitter el post. ful example of a bureaucracy that has gone One key question was why Cordray wrong and is almost entirely unaccountable feelings about passed over David Silberman, who had to the people that are supposed to oversee served as acting deputy director for nearly it and supposed to pay for it. I still have the two years, in naming a full-time deputy di- same fundamental principled misgivings final Cordray rector. Silberman kept his job as associate about the way this bureau is structured. ... director of research, markets and regula- That being said, that is outside the bounds maneuver tions. of the director to fix.” By Kate Berry and Ian McKendry Cordray’s move was widely panned out- He said he supported efforts to put the November 28, 2017 side the agency, with many blaming him CFPB on congressional appropriations and Employees at the Consumer Financial for sowing discord at the CFPB as he left. add more safeguards, but that was an issue Protection Bureau are privately question- Though Cordray has claimed he was fol- for Congress, not him. ing why outgoing director Richard Cordray lowing the Dodd-Frank Act in appointing “I was just learning about the powers abruptly tapped a 34-year-old chief of staff English as acting director, the CFPB’s own that I have as acting director — they would with no enforcement, supervisory or legal general counsel, Mary McLeod, disagreed. frighten most of you,” he said. “It would experience to head the embattled agency “This was a continuation of Richard Cor- probably worry you to find out how little after he resigned. dray’s historical practices as he went out oversight Congress has over me right now Many were caught off guard when Cor- the door to create as much chaos and con- as acting director.” dray handed the reins to Leandra En- flict as he could,” said Scott Pearson, a law- Asked if he would eliminate the agency glish by naming her deputy director as he yer at Ballard Spahr. if he could, Mulvaney said he would have stepped down on Friday. The White House Richard Hunt, the president and CEO of AMERICAN BANKER PAGE 7 the Consumer Bankers Association, ques- banks,” Warren said. has been attempting to further the percep- tioned why Cordray waited until the last The progressive groups are also hoping tion that he’s in control. Although he al- minute to name a new deputy director. that a battle over the bureau can transcend ready has a Twitter account as head of the “I like Leandra, I think she was a terrif- bank regulation. management and budget office, he created ic chief of staff, and she did everything she “The public is paying attention,” said another one Tuesday describing himself as could to keep the trains running on time,” Adam Green, co-founder at the Progres- acting CFPB director. Hunt said. “But she has never run a govern- sive Campaign Committee, before leading ment agency, never run a business and nev- a chant: “Hey, hey, ho, ho, Mick Mulvaney er worked at a bank. I hope she’s not being has got to go!” used as a pawn, because certainly David Sil- When asked whether the fate of the bu- Five big berman was highly qualified to serve.” reau will bleed into the 2018 midterm elec- Democrats have rallied to English’s de- tions and become a campaign issue, Warren questions fense, but that may not help her cause. said, “Boy — it sure ought to be.” English barely spoke at a public appear- “This is not about politics,” Warren said. ance Monday with Sen. Elizabeth Warren, “This is about whose side you are on. Don- about D-Mass., and Senate Minority Leader Chuck ald Trump said all during his campaign that Schumer, D-N.Y., that appeared awkward. he was going to be on the side of working Mulvaney-led Mulvaney used the appearance to accuse people, that he was going to stand up to her of playing politics while he was at the Wall Street, and he has done the world’s CFPB By Kate Berry November 29, 2017 With leadership of the Consumer Finan- cial 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 eas- ing 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 lend- ing rule are beyond his authority to change in the short-term, many in the industry believe otherwise and are gearing up to en- “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 courage him to change effective dates and front of the CFPB. reopen old rulemakings. The task ahead for Mulvaney will not be CFPB taking control of the agency. biggest U-turn.” easy or quick, however. But Democrats have persisted in their ef- The issue may be resolved soon. District “An administrative agency can’t just re- forts. Judge Timothy J. Kelly will hold a hearing peal rules that are in effect by fiat, and it With paint buckets drumming in the Tuesday afternoon to resolve the leadership can’t ignore what Congress has instructed background and CFPB employees gazing conflict. Many predicted that English would it to do,” said Warren Traiger, senior coun- through windows and taking pictures of lose. sel at Buckley Sander. “An agency can’t just protesters below, Warren and Jeff Merkley, “She has a very tough case on the mer- declare rules void; it needs to go through D-Ore., led a rally Tuesday with progressive its and the key requirement to get relief is the same rulemaking process to amend or groups at the bureau’s headquarters, less a likelihood of success on the merits,” said negate what’s out there, and that process than a block from the White House. Andrew Pincus, a partner at Mayer Brown has to withstand the standard of not being “This is about Wall Street banks versus and former assistant to the solicitor general arbitrary or capricious.” families and right now Donald Trump has at the Justice Department. The mortgage industry in particular put himself firmly on the side of Wall Street While the case moves forward, Mulvaney wants clearer guidance from the CFPB on a PAGE 8 AMERICAN BANKER host of mortgage regulations mandated by the Environmental Protection Agency, has A public appeal from the acting CFPB the Dodd-Frank Act. The bureau is required reassigned scientists and academics at the director could give them some cover, but it to review some of its rules within five years EPA, so too is Mulvaney expected to take may not be enough. Ultimately, Mulvaney after they take effect, which presents Mul- the ax to what he considers a bloated bu- could give Congress time to take his own vaney and the industry with an opportunity reaucracy. action if lawmakers don’t move forward. to change course. Since most CFPB senior managers are “There will be tweaks to the rules over- not part of the agency’s union, that makes Will the CFPB delay implementation all, and opportunities for modifications to them vulnerable to being ousted. More- of the Home Mortgage Disclosure Act adjust issues of concern for the industry,” over, if they are suspected of being loyal rules? said Quyen Truong, a partner at Stroock & to former director Richard Cordray, Mul- The Dodd-Frank Act required the mort- Stroock & Lavan, and a former CFPB assis- vaney will have extra incentive to get rid gage industry to collect and report certain tant director and deputy general counsel. of them. data on every mortgage including the eth- “Overall it would take some time before There are three ways to get rid of em- nicity, race and sex of potential borrowers. any major changes are made to the existing ployees at the CFPB: firing individuals for The mortgage industry has spent years rules or new rules or guidelines are adopt- cause, instituting a reduction in the work- modernizing systems to meet a January ed. I don’t think that there will be major force or reassigning senior managers to 2018 deadline for new Home Mortgage Dis- actions right away; there will be gradual different jobs. closure Act reporting. modifications.” No one is expected to be fired on the That is unlikely to change. “I would be Following are five key questions now that spot, said one former top CFPB official. very surprised if there were any changes Mulvaney is solidly in charge: More likely, Mulvaney or his lieutenants or delays to implementation of the new will sit down with managers and explain HMDA collection and reporting require- Is Mulvaney going to be a figurehead that they can keep their jobs if they are ments,” Traiger of Buckley Sander said. and leave the day-to-day operations to on board with the new regime, or be re- “Especially for the many lenders who have someone else? assigned and stripped of their portfolio of invested millions in implementing the new Mulvaney told reporters this week that duties. rule, it would create a lot of operational he would split his time between CFPB and headaches.” OMB, working six days a week until Pres- Will the CFPB reopen the payday rule? But lenders are also concerned about ident Trump can nominate a permanent Though Mulvaney has said he cannot the CFPB’s plans to make the vast majori- successor who is confirmed by the Senate. change rules that have already been final- ty of HMDA data public, beginning in 2019 But many observers believe he will ized, he could change the effective date of (aggregate data is already public, but this hand the reins of day-to-day operations a rule or reopen it for public comment. would go further). That is one area ripe for to a trusted lieutenant, given the fact that Some expect that will happen with the re- change. the Trump administration is facing a loom- cently finished small-dollar lending rule, In September, the CFPB proposed ex- ing potential government shutdown. Sen- which has a 20-month lead time before it cluding 11 data points, such as property ate Minority Leader Chuck Schumer and goes into effect. addresses and credit scores, from being House Minority Leader Nancy Pelosi can- Mulvaney may also urge lawmakers to publicly disclosed, primarily to protect celed a planned meeting with President repeal the rule, which is expected to up- consumers’ privacy and to make sure con- Trump on Tuesday after the president said end the payday lending business. sumers cannot be individually identified. on Twitter that a budget deal was unlikely In October, the Senate repealed the Financial institutions are concerned to happen. The two sides have until Dec. 9 CFPB arbitration rule after Keith Noreika, that consumer advocates or media outlets to agree to a plan. then the acting head of the Office of the would use the data to look at mortgage As head of OMB, Mulvaney is expect- Comptroller of the Currency, released approval rates to allege discrimination ed to be actively involved in those talks, data claiming it would be harmful to con- against banks and lenders. making it unlikely he will be able to devote sumers. The arbitration rule was repealed “It’s certainly possible that the change much time to CFPB issues in the near term. with a tie vote cast by Vice President Mike in leadership at the CFPB could impact But if he plans to appoint a lieutenant, it is Pence. what is ultimately released to the public in not clear yet who that will be. The politics of overturning the payday 2019,” Traiger said. lending rule are trickier, however. Re- Is the top management at the CFPB publicans were barely able to manage the What’s the plan for the CFPB’s propos- now working on borrowed time? votes to overturn the rule banning manda- als on debt collection? Though Mulvaney instituted a hiring tory arbitration clauses in financial claus- The CFPB began work in 2013 to fix freeze, the Trump administration’s goal is es for fear of appearing to be too close to abuses in the debt collection market after to reduce the size of government agencies the financial services industry. Many GOP widespread complaints by consumers. and eliminate regulations. lawmakers are expected to be reluctant to Due to issues in the governing statutes, Just as Secretary of State Rex Tillerson publicly support payday lenders, which the CFPB split its plan into two parts: has announced plans to cut his agency by have a bad reputation among much of the one governing first-party and the oth- at least 30% and Scott Pruitt, the head of public. er handling third-party debt collectors. AMERICAN BANKER PAGE 9

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 accura- cy 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 in- formation. But the agency has been mum since. Moreover, it is no longer clear if it intends to move forward with either the third-par- ty or first-party proposals, and it may ulti- mately choose to drop the matter entirely.