The CFPB’s Employees Will Determine the Agency's Fate

A legal showdown over its leadership is overshadowing the importance of its overwhelmingly liberal staffers.

Office of Management and Budget Director Mick Mulvaney leaves the Consumer Financial Protection Bureau building on November 27th. (Carlos Barria / Reuters)

A legal struggle is unfolding over control of the Consumer Financial Protection Bureau, sparked by Richard Cordray’s resignation as director last week. Leandra English, the agency’s deputy director (promoted by Cordray) says she’s in charge, but President Trump says that his pick to run the agency, Mick Mulvaney, is the acting director. A federal district judge in Washington, D.C., will adjudicate these claims imminently, leaving Mulvaney or English as the agency’s temporary head—at least until an appeals court weighs in.

On its surface, the struggle for control of the agency is a question of law—or more specifically, a question of which of two laws takes precedence over the other. The Federal Vacancies Reform Act of 1998 says that the president “may direct” any Senate-confirmed official to head an agency in the event of a vacancy. (Mulvaney qualifies because the Senate voted 51–49 in February to confirm him as director of the Office of Management and Budget.) The Dodd-Frank Act of 2010 says that the deputy director of the CFPB becomes “acting Director in the absence or unavailability of the Director.” The question for the courts is whether the Federal Vacancies Reform Act, which gives the president the power of temporary appointment, takes precedence over the Dodd-Frank Act, which seems to imply that the deputy director’s ascension is automatic.

As I’ve written, there’s a good argument that the Dodd-Frank Act yields to the Federal Vacancies Reform Act. But while this statutory dispute is fascinating to law professors like me, whether the CFPB remains a robust champion of consumer interests does not depend on whether Mulvaney or English emerges victorious from this legal battle. Ultimately, the agency’s 1,700-plus employees will do more than any judge to determine the bureau’s fate.

Even if English prevails in court, her tenure as acting director wouldn’t last very long. First, President Trump has the authority to fire her at his whim: The director of the CFPB enjoys what’s called “for-cause” removal protection under the Dodd-Frank Act, which means that the president can remove her only “for inefficiency, neglect of duty, or malfeasance in office.” But the Dodd-Frank Act does not give for-cause protection to the deputy director, and it does not extend the director’s “for-cause” protection to a deputy serving in the director’s stead.

Second, even if Trump does not fire English, she will only serve until a replacement is appointed by Trump and confirmed by the Senate. With a Republican-controlled Senate that has mostly rubber-stamped Trump’s appointees so far, the confirmation process probably wouldn’t take long. Maybe English could retain the acting-director post for a few more weeks, but it’s a safe bet that she will be out by early 2018.

And in any event, it was always the case that President Trump was going to get to name a new CFPB director. The term of the agency’s outgoing head, Cordray, would have expired in July 2018. Even if it weren’t for Cordray’s premature departure, the president would have had an opportunity in the near future to put a foe of the agency in its top spot.

But by the same token, Mulvaney’s power over the agency as acting director would be seriously constrained even if he wins the court fight. As an initial matter, he remains the director of the Office of Management and Budget (OMB), which already is a full-time job. While he spent Monday morning at the CFPB headquarters distributing doughnuts to staff, he also has $4 trillion or so in government spending to oversee at his OMB job. And even if he had undivided time to devote to the CFPB, the head of any 1,700-person organization must rely on subordinates to get things done.

Those subordinates are overwhelmingly liberal—more than 99 percent of campaign contributions by CFPB employees since 2011 have gone to Democratic candidates or left-leaning political-action committees. And the very fact that they have chosen to work for the CFPB is a strong indication that they are committed to the agency’s pro-consumer agenda. Moreover, the agency’s employees are generally protected by the federal merit system, making it very difficult for the director to fire them. Endowed with job security and imbued with a sense of mission, these employees will likely continue to go about their business of enforcing the laws on the books.

Indeed, this is exactly what happened at the Environmental Protection Agency after President Reagan installed the archconservative Anne Gorsuch Burford at its helm in 1981. (Yes, that’s Gorsuch as in Neil Gorsuch—the most junior justice on the Supreme Court is her son.) As the political scientist B. Dan Wood has documented, “following the Reagan inauguration, the EPA bureaucracy bucked the administration and used its slack resources to substantially increase surveillance of pollution.” It took about eight months for the Reagan administration to rein in the EPA careerists and bring enforcement activity below the level of the Democratic Carter years. And after Burford was forced out of the EPA in early 1983, enforcement activity once again surged above the Carter administration’s high watermark.

There are, to be sure, several ways in which a CFPB director who is hostile to consumer interests can impede the agency’s efforts. First, the director has control over the agency’s budget, so he can try to starve it of cash—and budget cuts at the CFPB could begin as soon as January. Second, the director could freeze hiring at the agency. Indeed, Mulvaney already has imposed a 30-day hiring stoppage, but even with budget cuts and a hiring freeze, existing employees would hold onto their jobs—and in light of federal merit-system protections, their salaries can’t be slashed. Third, the director can prevent the agency from promulgating new rules. To this end, Mulvaney says that the agency won’t issue any new rules for a month. But it’s not so easy for the director to roll back existing regulations. That generally requires a process of notice and comment, which on average takes about 18 months. The process may last even longer if lower-level agency officials who oppose the new director’s deregulatory agenda drag their feet.

So in the final analysis, it does indeed matter who is head of the CFPB: A director set on deregulation can slow the agency significantly. But it also matters who staffs the agency, because those employees can stymie the director’s efforts to dismantle the bureau. The fight over the acting director title is thus only the first round in what’s likely to be a longer struggle between the Trump administration and the CFPB’s employees over the agency’s direction. At the end of the day, President Trump will get to decide who directs the CFPB, but that director may soon discover that being in charge is not always the same as being in control.