Democrats are spoiling for a fight over the CFPB

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Democrats and progressive groups have drawn a line in the sand over Consumer Financial Protection Bureau Director Richard Cordray, hoping to capitalize on the successful march on Washington this past weekend to rally support for him and his agency.

They are trying to convince President Trump not to attempt to fire Cordray or, failing that, be ready to push back if he does seek to do so.

"If Trump is foolish enough to take on the very government agency that works to wrestle money back from corrupt financial institutions on behalf of American consumers, then a fight he shall have," said Karl Frisch, the executive director of Allied Progress, a progressive advocacy group.

Roughly 500 advocacy groups across the U.S. are poised to rally their supporters if Trump fires Cordray, said Gynnie Robnett, a campaign director at Americans for Financial Reform.

The groups are motivated by the prospect that Trump would replace Cordray with a Republican director who opposes the agency and would gut the CFPB's proposals on arbitration, payday lending and debt collection.

Payday lending in particular is a contentious subject for many church groups and state consumer advocates that have fought to rein in small-dollar lenders that trap low-income workers in debt.

"Firing Cordray might be part of the billionaire agenda, but Republican senators and House members ... are going to see a huge pushback from the country," Sen. Sherrod Brown, the top Democrat on the Senate Banking Committee, said last week on a conference call with reporters. "There's a nervousness and jitteriness because they know they're on the wrong side of these issues. Trump should reject efforts by predatory lenders and their friends in Congress to gut consumer protections."

Whether Trump has the power to fire Cordray is unclear. Under the Dodd-Frank Act, the president can fire the CFPB director "for cause," though it's uncertain whether anything Cordray has done in office would qualify under that definition.

But observers are also closely watching a court case, PHH Corp. v. CFPB, which could allow the president to act unilaterally. Both Brown and Rep. Maxine Waters, D-Calif., joined a group of consumer advocates Thursday in filing separate motions to intervene in the case.

"President Trump has voiced strong opposition to the Dodd-Frank reforms that created the CFPB, and multiple news outlets have reported over time that his team is considering steps that would directly affect the conduct of this litigation," the brief stated. "There is now a manifest need for movants to intervene and protect their interests in the CFPB structure that Congress created, which may not be adequately represented by any party to the litigation."

The groups seeking to intervene on behalf of the CFPB include Americans for Financial Reform, the Center for Responsible Lending, Self-Help Credit Union, the Leadership Conference on Civil and Human Rights, and U.S. Public Interest Research Group. They join 16 state attorneys general, who have also petitioned the court to help defend the CFPB.

Cordray sent his strongest signal yet on Tuesday that he has no intension of resigning, saying that the CFPB's "independence is an important principle worth fighting for and preserving."

While progressive groups and Democrats ready their ammunition, it is uncertain if Trump wants to risk a public backlash by attempting to fire Cordray. Senate Democrats have also signaled they may oppose any regulatory reform bill if Trump attempts to oust Cordray. Sean Spicer, the president's top spokesman, said Monday that "no decision" had been made on the consumer bureau.

It is also unknown whether the CFPB, a small federal agency with an estimated $646.2 million budget in fiscal 2017, and roughly 1,620 employees, has caught the new president's attention.

Trump has never mentioned the CFPB by name. He has expressed support for the Financial Choice Act, a House Republican bill that would restructure the bureau as a five-member commission and subject it to congressional appropriations.

"The question is, we don't know if the CFPB is a priority and the Democrats have done a very good job of circling the wagons," said Joanne Needleman, an attorney at the law firm Clark Hill PLC. "Do both sides want a bloody battle on their hands over an agency that supports the little guy?"

Treasury Secretary-designate Steven Mnuchin has said he supports independent funding for the CFPB, which is funded from the Federal Reserve. Some consumer finance lawyers said they expect Cordray to be fired, which would prompt a nasty legal battle, but only after Mnuchin is confirmed and a new CFPB director is nominated.

In the meantime, progressive groups are using Trump's rhetoric during the campaign to try to keep him from acting.

"Trump is a maverick and we'd like to see him come out and endorse Cordray, not see him as the enemy," said Lauren Saunders, an associate director at the National Consumer Law Center. "Wall Street is pushing to have Cordray fired because he's put money from big banks in the pockets of consumers. If Trump fires Cordray, it's total and complete war, not just on the CFPB. It would poison relationships with moderates in Congress and it would show [Trump] is doing the bidding of Wall Street."

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