Two directors battle for control of consumer bureau

An unusual scene unfolded Monday at the Consumer Financial Protection Bureau (CFPB) as two officials claiming to be the rightful acting director went to work, putting employees in the middle of an escalating legal dispute. 

President Trump’s appointee to temporarily lead the agency, Office of Management and Budget Director Mick MulvaneyJohn (Mick) Michael MulvaneyOvernight Finance: Lawmakers see shutdown odds rising | Trump calls for looser rules for bank loans | Consumer bureau moves to revise payday lending rule | Trump warns China on trade deficit Overnight Regulation: Dems claim 50 votes in Senate to block net neutrality repeal | Consumer bureau takes first step to revising payday lending rule | Trump wants to loosen rules on bank loans | Pentagon, FDA to speed up military drug approvals Consumer bureau takes first step to revising payday lending rule MORE, showed up at CFPB headquarters in the morning with a large Dunkin’ Donuts bag. He set up shop in the office that had been used by Richard CordrayRichard Adams CordrayOvernight Finance: Lawmakers see shutdown odds rising | Trump calls for looser rules for bank loans | Consumer bureau moves to revise payday lending rule | Trump warns China on trade deficit Overnight Regulation: Dems claim 50 votes in Senate to block net neutrality repeal | Consumer bureau takes first step to revising payday lending rule | Trump wants to loosen rules on bank loans | Pentagon, FDA to speed up military drug approvals Consumer bureau takes first step to revising payday lending rule MORE, who resigned as director last week, and met with senior CFPB employees. 

Meanwhile, CFPB Deputy Director Leandra English, whom Cordray appointed to be his acting successor, staked her claim to be the temporary chief of the bureau. She met with prominent Democrats on Capitol Hill to rally support for her claim.

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In response, Mulvaney, in his first memo to CFPB employees, instructed them to ignore and report all official communications from English.

“I apologize for this being the very first thing you hear from me. However, under the circumstances I suppose it is necessary,” Mulvaney said in the memo. “If you’re at 1700 G Street today, please stop by the fourth floor to say hello and grab a doughnut.”

The dueling acting directors put the CFPB in limbo as a federal court weighs English's lawsuit against Trump asserting her claim to be acting director.

English sued Trump on Sunday night in the District Court for the District of Columbia for appointing Mulvaney as the bureau’s acting director, saying he had illegally superseded the CFPB line of succession outlined in the Dodd-Frank Act. 

English’s complaint claims that she is the rightful acting director of the agency and that the court should bar Mulvaney from taking the post. English claims that the provision of the Dodd-Frank Act that requires the deputy director to serve as acting director overrules the Federal Vacancies Act, which Trump used to appoint Mulvaney. 

But the CFPB’s chief counsel instructed bureau employees to treat Mulvaney as the acting director, supporting arguments made by the White House and Justice Department’s Office of Legal Counsel.

“It is my legal opinion that the President possesses the authority to designate an Acting Director for the Bureau under the [Vacancies Act,]” wrote CFPB Chief Counsel Mary McLeod.

Mulvaney was seen entering the CFPB’s headquarters in downtown Washington early Monday morning through a side door. A Mulvaney aide later tweeted a picture of the OMB director reading briefing materials in the CFPB director’s office.

“[Mulvaney] sitting in director's office,” read the tweet from OMB aide John Czwartacki. “Already hard at work as acting director at cfpb.”

The aide also tweeted a picture of Mulvaney meeting with senior CFPB officials Monday morning, and another picture of holiday-themed Dunkin Donuts boxes emptied by bureau employees.

Mulvaney’s breakfast diplomacy didn’t stop English, who addressed herself as the "acting director" in a weekly email sent to CFPB employees. She also met with top Democratic lawmakers at the Capitol, including Senate Minority Leader Chares Schumer (N.Y.) and Sen. Elizabeth WarrenElizabeth Ann WarrenWarren: Trump is a 'racist bully' Poll: Oprah would outperform Warren, Harris against Trump in California Democrats continue to dismiss positive impacts of tax reform MORE (Mass.), the bureau’s architect. 

Mulvaney appears to be in control of the CFPB despite the dueling claims over its leadership, though clarity over the bureau’s future could come soon. D.C. District Court Judge Timothy Berry, a Trump appointee, scheduled a hearing in the case for 4:30 p.m. Monday afternoon.

Meanwhile, Mulvaney quickly instituted a 30-day regulatory and hiring freeze at the CFPB, but pledged to keep the bureau’s statutory and litigation commitments.

He said during a Monday news conference that Trump's goal for him is to “get [the bureau] to the point where it can protect people without trampling on capitalism.”

“We need to figure out a way to both follow the law and protect citizens,” Mulvaney said, “but without choking off access to capital.”

Prominent Democrats, who have fiercely defended the CFPB under Cordray, have called Trump’s appointment of Mulvaney an illegal attempt to destroy the agency from within.

While serving as a congressman before joining Trump's administration, Mulvaney sponsored bills to eliminate the CFPB and backed other legislation to put it under closer legislative oversight.

Democrats and progressive groups have also raised concerns that Mulvaney sitting on the board of the Federal Deposit Insurance Corporation and Financial Stability Oversight Council as the acting CFPB head would give the White House inappropriate influence over regulation.

Mulvaney has, in the past, called the CFPB "a sick, sad” joke that shouldn't exist, and reaffirmed his opinion of the agency on Monday.

“My opinion of the structure of the CFPB has not changed. It is still an awful example of an agency gone wrong,” Mulvaney said. “I’m just learning about the powers I have as acting director. They would probably frighten you.”

- This story was updated at 5 p.m.