Two Camps Assert They Each Have Control Over the CFPB -- Update

The Trump administration and an Obama-era official dueled for control of a federal financial regulator Monday, with members from each camp sending messages to employees suggesting they were in charge.

President Donald Trump's interim pick to run the bureau -- Mick Mulvaney, the White House budget chief who is a harsh critic of the agency -- appeared to have the upper hand, at least for now. He arrived at the Consumer Financial Protection Bureau on Monday and started work in the director's office, according to tweets by a spokesman from the White House's Office of Management and Budget. Leandra English, a career staffer appointed Friday to lead the CFPB, was also in touch with employees asserting herself as acting director, but it wasn't clear whether she was in the bulding.

The struggle for control of the CFPB, a regulator of consumer-financial matters created after the financial crisis, started after its director, Richard Cordray, appointed by President Barack Obama, stepped down on Friday. The Trump administration moved to take control of the bureau on an interim basis while a permanent director is identified and confirmed by the Senate. Ms. English sued Sunday night to stop the White House from taking over.

Mr. Trump asserts he has the power to appoint an acting director of the agency, while the departing chief believed the law said otherwise. That means that both Mr. Mulvaney and Ms. English have claimed the acting top job.

Shortly after Mr. Mulvaney arrived Monday, with a bag of doughnuts in hand, he sent an email to the CFPB's 1,600 staffers instructing them to disregard any orders they receive from Ms. English "in her presumed capacity as acting director" and to inform the bureau's general counsel in case of such contact. The memo said that Ms. English had sent an email to staffers Monday morning "in an attempt to exercise certain duties as acting director."

"I apologize for this being the very first thing you hear from me," he said in the note, which was reviewed by The Wall Street Journal. "However, under the circumstances I suppose it is necessary."

In another sign that Mr. Mulvaney was in control, communications staff from the White House's OMB started handling media queries for the CFPB.

Outside the agency's headquarters, across from the White House complex, a few dozen members of consumer groups had gathered holding signs. It was a peaceful protest, and none tried to prevent Mr. Mulvaney and his staff from entering the building.

Drama over the immediate future of the CFPB is still playing out. Mr. Mulvaney hasn't taken public actions yet to alter the course of the bureau, but he is expected to do so soon unless legal developments freeze his involvement in the agency. Ms. English is seeking a temporary restraining order in federal court, in a process that could play out quickly and raises questions on how different statutes regarding succession apply to the CFPB.

Some experts say there is little incentive for Mr. Trump to quickly nominate a permanent director. Rather, by allowing Mr. Mulvaney a year or longer to serve as a caretaker at the CFPB, the president could ensure several years of Republican control of the agency because directors serve five-year terms once they are confirmed.

The agency was created in the wake of the financial crisis after criticism that the previous regulatory structure didn't prevent a mortgage-market meltdown because the responsibility for consumer protection was scattered among various agencies. To allow the CFPB to work quickly, lawmakers designed the bureau to be independent, stating that its single director could only be dismissed by the president for "inefficiency, neglect of duty or malfeasance in office" and insulating its budget from congressional oversight.

CFPB moves drew praise from consumer advocates and Democrats, as the agency implemented new rules governing mortgage and credit cards and billions of dollars to consumers through enforcement actions. Republican lawmakers and the financial industry have long said the agency's rules and supervisory and enforcement activities have increased compliance costs and reduced credit availability for vulnerable consumers the bureau was created to protect. The pushback has been particularly strong from industries that had previously been regulated lightly, such as so-called payday and auto lending.

Republicans have proposed curbs to the CFPB's power, giving Congress control of its budget and narrowing the scope of its regulatory powers that would leave it primarily an enforcement agency.

Mr. Mulvaney, a former Republican House member from South Carolina, once called the CFPB a "sad, sick joke" and has called for an overhaul of the agency, including curtailing its budget. Other possible actions include delaying the enactment of a recently issued rule on high-interest small consumer loans known as payday lending, amending a 2013 mortgage rule that tightened underwriting standards and reassessing pending lawsuits against companies such as student-loan servicer Navient Corp.

Consumer advocates are closely monitoring whether Mr. Mulvaney will shut down or alter the CFPB's complaint database, a tool used by hundreds of thousands of consumers and a subject of protest from the financial industry in part because it names companies and publishes complaints without verifying the accusations.

Write to Yuka Hayashi at

(END) Dow Jones Newswires

November 27, 2017 13:21 ET (18:21 GMT)