After a significant setback this week in the legal bid to unseat Mick Mulvaney as acting director of the Consumer Financial Protection Bureau, consumer groups are pinning their hopes on a second case they hope will provide a different result.
Oral arguments are scheduled for Friday in a credit union's challenge to Mulvaney's appointment at the U.S. District Court for the Southern District of New York.
"The legal fight is far from over," said Brianne Gorod, chief counsel at the Constitutional Accountability Center, on a conference call Thursday with reporters. The call was sponsored by two consumer groups, Americans for Financial Reform and the Center for Responsible Lending.
The case by the Lower East Side People's Federal Credit Union is separate from the one brought by CFPB Deputy Director Leandra English, which also protests Mulvaney's appointment. U.S. District Judge Timothy J. Kelly ruled Wednesday against English's request for an injunction against Mulvaney. Kelly said English was unlikely to prevail on the merits of her case.
Gorod called Kelly's ruling "disappointing." Though she said "Ms. English can appeal," she appeared optimistic about the credit union's challenge. Both lawsuits rest on the idea that the Dodd-Frank Act says the deputy director shall serve as acting director in the absence of a Senate-confirmed director. Mulvaney was appointed, however, under the Federal Vacancies Reform Act, which gives the president wide discretion to temporarily appoint acting leaders of agencies.
Consumer groups and the credit union involved in the case argue that Mulvaney's decisions as acting director are invalid.
"Donald Trump and Mick Mulvaney executed a hostile takeover of [the CFPB], and anything Mr. Mulvaney does is illegal," said Ilann Maazel, a partner at Emery Celli Brinckerhoff & Abady LLP who represents the credit union.
Linda Levy, the CEO of the $55 million-asset Lower East Side People's Federal Credit Union, said any weakening of the CFPB would impact the credit union's low-income members.
"I am concerned that there are changes being made that affect our everyday work," Levy said on the call. "We just don't know where we stand anymore with regulations from the CFPB at this time."
English has argued that President Trump's appointment of Mulvaney was an end run around appointing a permanent director and undermined the Senate's advice and consent rule.
The Justice Department and the CFPB's own general counsel have said President Trump was using the broad powers under the Federal Vacancies Reform Act in appointing Mulvaney, who also heads the Office of Management and Budget.
Nina Mendelson, a professor at the University of Michigan Law School, said federal courts typically read statutory language to mean what the statute says. Several agencies, including the Defense Department and the Small Business Administration, have similar mandatory language, she said.
"The statute is not unusual in constraining the president's authority for a certain period of time," Mendelson said. "The language is mandatory, Dodd Frank says the deputy director shall serve as acting director. The question is whether the [Federal Vacancies Reform Act] gives the president additional choices to select someone else."
If a federal court finds that Mulvaney's appointment was not lawful, it could undo his actions to date. Consumer attorneys cited a 2010 Supreme Court case that invalidated hundreds of decisions by the National Labor Relations Board.
"If it turns out that Mulvaney has indeed been illegally serving as acting director, that could bring into legal question all the actions he has taken, because he would not have [had] the legal power to act," she said.