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Another Argument For Why Mick Mulvaney Is The CFPB Acting Director

As we reported, the DOJ’s Office of Legal Counsel (OLC) has issued a memorandum to the President’s Counsel in which it opined that the President has the legal right to appoint Mick Mulvaney CFPB Acting Director under the provision of the Federal Vacancies Reform Act (FVRA) that authorizes the President to temporarily fill an executive agency position requiring confirmation when the position becomes vacant because the person holding it “dies, resigns, or is otherwise unable to perform the functions and duties of the office.”  In the OLC’s opinion, the FVRA provision can be used by the President as an alternative to 12 U.S.C. § 5491(b)(5(B), the provision in the Consumer Financial Protection Act (CFPA) that provides the CFPB Deputy Director “shall serve as acting Director in the absence or unavailability of the Director.”  We believe the OLC has advanced strong arguments in support of its position.  However, we also believe that the OLC was mistaken in rejecting another argument in support of the President’s action.

As a threshold matter, the OLC addressed the coverage of 12 U.S.C. § 5491(b)(5(B), upon which Leandra English, former Director Cordray’s choice of Deputy Director (and choice of successor), relies as the basis for her claim that she has a legal entitlement to the position of Acting Director.  While the OLC acknowledged that “the question is not free from doubt,” it concluded that the statutory language “absence or unavailability” should be construed to include a vacancy resulting from a resignation.

We respectfully disagree with the OLC’s construction of the phrase “absence or unavailability of the Director.”  In our view, there are several compelling reasons why the phrase should not be construed to cover the present situation—a vacancy in the position of CFPB Director created by the Director’s resignation.

First, the plain language of the phrase suggests to us that it was not designed for vacancy appointments and was instead intended for the circumstance where the Director is temporarily absent or unavailable.  We would submit that, after former Director Cordray resigned, there was no longer any Director who could be absent or unavailable.

Additionally, as the OLC noted, providing for a vacancy appointment by referring to the “absence or unavailability” of the Director is “unusual.”  In fact, the OLC was not able to identify any statute using this formulation with respect to the appointment of an acting officer.  Rather, Congress has typically referred to vacancies in office.  For example, Congress has expressly provided that when the offices of OMB Director, FAA Administrator, or Administrator of the SBA are “vacant” or have a “vacancy,” the Deputy Director or Administrator acts as Director or Administrator.  This indicates that when Congress has wanted to give an officer holding a Deputy position the authority to run an agency in an acting capacity when the position of agency head became vacant, it has done so expressly and unambiguously.

Indeed, the term “vacancy” is used in other titles of the Dodd-Frank Act (the CFPA is Title 10), such as in connection with replacing members of the Financial Stability Oversight Counsel and the FDIC Board of Directors.  Moreover, with regard to the FDIC Board, Section 336 of the Dodd-Frank Act specifically refers to a “vacancy” in the office of CFPB Director and distinguishes that from an “absence or disability.”  (Under both circumstances the Acting CFPB Director is to be a member.)

Second, the legislative history of the CFPA provision does not, as some commentators have argued, compel the conclusion that the CFPA provision was intended to override application of the FVRA in the present situation.  The version of the CFPA that originally passed the House stated that “In the event of vacancy or during the absence of the Director (who has been confirmed by the Senate pursuant to paragraph (2)), an Acting Director shall be appointed in the manner provided in section 3345 of title 5, United States Code.”  Section 3345 of title 5 is a reference to the FVRA.  The quoted language does not appear in the CFPA as enacted, which designates the Deputy Director as Acting Director in the Director’s “absence or unavailability.”

Rather than concluding that Congress’ decision not to specifically make the FVRA applicable to the Acting Director position means Congress intended for the FVRA never to apply, one could just as easily reach the opposite conclusion.  More specifically, Congress can be assumed to have known that the FVRA applies when the head of an agency “dies, resigns, or is otherwise unable to perform the functions and duties of the office.”  Accordingly, the CFPA legislative history could readily be interpreted to mean that Congress eliminated the House version’s reference to a “vacancy” because it knew the FVRA would apply by its terms to a vacancy created when the Director “dies or resigns” or when the Director was “otherwise unable to perform the functions and duties of the office” and only wanted to create a rule of succession for when the Director was temporarily “otherwise unable to perform the functions and duties of the office.”  In other words, in using the phrase “absence or unavailability,” Congress was only making the FVRA inapplicable where the Director remained in office but was temporarily unable to carry out his leadership role.

Third, this construction of the phrase “absence or unavailability” is consistent with established rules of statutory construction.  One of those rules provide that when two federal statutes are arguably in conflict with one another, the more specific statute trumps the more general statute (no pun intended).  A second such rule provides that when two federal statutes are arguably in conflict with one another, they should be harmonized to the extent possible.  There is no question that the FVRA expressly covers the precise situation here – namely, a vacancy created by a resignation—while the coverage of the CFPA provision in this circumstance is, at best, ambiguous.

Fourth, a construction of the phrase “absence or unavailability” that does not cover a vacancy is also consistent with the “checks and balances” role of the Senate confirmation process.  Unlike the CFPB Director, the CFPA does not require the Deputy Director to be confirmed by the Senate.  Thus, if the CFPA provision were to cover a vacancy, it would allow someone who has not been confirmed by the Senate to lead the CFPB for an indeterminate period of time.

It bears noting that the OLC did not cite a single case on point for its expansive construction of the phrase in question.  Rather, it apparently felt constrained by positions it had taken internally in the past.  In the OLC’s defense, its position was part of an overall reading of the statutes in question—one that resulted in the correct result that the President has the power to appoint an Acting Director.  We are not arguing with the ultimate OLC conclusion here.  Instead, we are merely suggesting that there are at least two roads to this conclusion and that neither should be rejected.

Copyright © by Ballard Spahr LLP


About this Author

Kaplinksy, partner, New York, finance

Alan S. Kaplinsky is Co-Practice Leader of the firm's Consumer Financial Services Group, which has more than 115 lawyers. Mr. Kaplinsky devotes his practice exclusively to counseling financial institutions on bank regulatory and transactional matters, particularly consumer financial services law, and defending financial institutions that have been sued by consumers in individual and class action lawsuits and by government enforcement agencies. Visit Mr. Kaplinsky's profile in Wikipedia.

Jeremy T Rosenblum, consumer financial services group, finance partner, Philadelphia, Pennsylvania, Ballard Spahr, UDAAP, TILA

Jeremy T. Rosenblum is Co-Practice Leader of the firm's Consumer Financial Services Group. He has devoted the past 30 years in private practice to representing the consumer financial services industry.

Mr. Rosenblum's practice focuses on federal and state lending and consumer practices laws, with emphasis on the interplay between federal and state laws, joint ventures between banks and nonbank financial services providers, the development and documentation of new financial services products (especially products designed to serve the needs of unbanked and under-banked consumers), bank overdraft practices and disclosures, geographic expansion initiatives, and compliance with federal and state consumer protection and usury laws, including "UDAAP" statutes prohibiting unfair, deceptive, and abusive acts and practices; the Truth in Lending Act (TILA); the Electronic Funds Transfer Act; E-SIGN; the Equal Credit Opportunity Act; and the Fair Credit Reporting Act (FCRA).

Mr. Rosenblum's practice involves regular dealings with industry trade groups and regulators. In this regard, he has drafted a number of amicus curiae briefs, to the U.S. Supreme Court and other courts, on behalf of a number of industry and business trade groups, including the American Bankers Association, the Consumer Bankers Association, the U.S. Chamber of Commerce, the Mortgage Bankers Association, the Financial Services Roundtable, and the American Financial Services Association.

In addition to his consumer financial services regulatory and litigation practice, Mr. Rosenblum represents banks, thrifts, and other entities in charter transactions; mergers, acquisitions, and conversions; asset securitizations; purchases of loan servicing rights; and public offerings and private placements of equity and debt instruments.