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Confusion and chaos engulf consumer agency

Two acting directors of the Consumer Financial Protection Bureau showed up for work Monday, trading memos and warnings as a political showdown threw the embattled agency into confusion.

White House budget director Mick Mulvaney, President Donald Trump’s choice to temporarily lead the bureau, arrived at about 7:30 a.m. and settled into the CFPB director’s office, where he read briefing books.

His challenger for the job, CFPB Deputy Director Leandra English, was also in the building. English, former Director Richard Cordray’s handpicked replacement, sent the staff an emailed greeting shortly before 8 a.m. and signed it with the bureau’s top title, acting director.

Mulvaney quickly fired back with a memo instructing staff to ignore any instructions from English. “I apologize for this being the very first thing you hear from me,” he wrote, and invited employees to the bureau’s fourth floor for doughnuts.

The jousting was part of a legal morass engulfing the agency after Cordray, its first director, abruptly resigned on Friday and handed the reins to English. While consumer advocates and Democrats fight to preserve Cordray’s legacy and the fledgling bureau’s independence, business lobbyists are using the mess to push for a reboot of the agency. Regardless of who prevails in the current fight, Trump is expected to name a permanent director in the coming weeks or months, making arguments over the acting director moot.

Cordray, who was appointed by former President Barack Obama, named English as acting director as of his resignation at midnight Friday. Before the handoff could occur, Trump designated Mulvaney, who heads the Office of Management and Budget, to lead the bureau until a permanent director could be nominated and confirmed.

On Sunday, English sued the administration in U.S. District Court in Washington, asking for a temporary restraining order to prevent Mulvaney from being recognized, even as the CFPB’s own lawyer sided with the Trump administration on the legality of Mulvaney’s designation. The case, English v. Trump, was assigned to Judge Timothy Kelly, a Trump appointee and former counsel to Sen. Chuck Grassley (R-Iowa). Congress confirmed Kelly to the bench on a 94-2 vote in September.

In a memorandum first obtained by POLITICO, CFPB general counsel Mary McLeod aligned with a Justice Department opinion issued over the weekend.

“It is my legal opinion that the president possesses the authority to designate an acting director for the bureau,” McLeod wrote in the Saturday memo to the CFPB leadership team. “I advise all bureau personnel to act consistently with the understanding that Director Mulvaney is the acting director of the CFPB.”

That prompted the White House to claim victory on Sunday night.

“Now that the CFPB’s own general counsel — who was hired under Richard Cordray — has notified the bureau’s leadership that she agrees with the Administration’s and DOJ’s reading of the law, there should be no question that Director Mulvaney is the acting director,” White House spokeswoman Sarah Huckabee Sanders said. “It is unfortunate that Mr. Cordray decided to put his political ambition above the interests of consumers with this stunt.”

But things remain far from settled. In her lawsuit, English named Trump and Mulvaney defendants and asked the court to establish her authority as acting director.

“Ms. English has a clear entitlement to the position of acting director of the CFPB,” the filing claims. “The president’s purported or intended appointment of defendant Mulvaney as acting director of the CFPB is unlawful.”

English, who was made the bureau’s deputy director as of Friday, is being represented in court by Deepak Gupta, a former senior counsel at the bureau. She filed the lawsuit in her capacity as deputy director and acting director of the CFPB. Gupta did not respond to requests for comment. CFPB spokeswoman Jennifer Howard did not immediately respond to questions.

The consumer bureau’s staff gathered at bureau headquarters on Sunday, but English did not attend, according to a person with knowledge of the meeting. Another staff meeting was scheduled for Monday morning.

Shortly after Mulvaney arrived for work on Monday, English sent a Thanksgiving email to staff, offering her “gratitude” for the bureau’s service. “It is an honor to work with all of you,” she said, signing the email as acting director.

The 2010 Dodd-Frank Act, H.R. 4173 (111), which created the CFPB, states that the consumer bureau’s deputy director shall “serve as acting director in the absence or unavailability of the director.” Until Friday, the bureau had been operating with an acting deputy director for years. English was named to the slot just as Cordray left, replacing acting deputy David Silberman.

The Justice Department’s Office of Legal Counsel on Saturday acknowledged the Dodd-Frank provision, but found that Cordray’s resignation amounted to an “absence,” giving Trump authority to fill the slot.

The bureau’s unusual structure, which vests power in a single director with a five-year term, has been a lightning rod since its creation. Businesses have accused the agency and Cordray of regulating by fiat and litigation and argued for more transparency. They’ve also challenged the CFPB’s constitutionality in court, in a lawsuit that could be decided within weeks or months.

Yet numerous polls have shown that consumer advocates remain strong champions of the agency’s work. The bureau says it has delivered $12 billion in relief, including canceled debt and compensation, to customers wronged by banks, credit unions, payday lenders and credit card companies.

The White House has been interviewing candidates to replace Cordray, including George Mason University’s Todd Zywicki, a critic of the agency.

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