In contrast to acting Director Mick Mulvaney's pro-industry, deregulatory stances, the Consumer Financial Protection Bureau has lately wielded a lot more of its regulatory clout.
The agency has accelerated enforcement actions against a mix of companies, upholding findings that originated in the Obama administration. And in a twist, the Mulvaney-led bureau — which has tried to undercut its own power — is proactively defending the CFPB's constitutionality as it targets firms.
“With a few notable exceptions, the bureau is actually in the same place from a litigation perspective that it was before Mulvaney took the reins," said Richard Gottlieb, a partner at Manatt, Phelps & Phillips. "Mulvaney's approach has been to defend the CFPB's constitutionality by ratification."
During the first seven months of Mulvaney's tenure, the CFPB had issued just one enforcement action, handing out the largest bank fine ever against Wells Fargo for failures in its auto lending and mortgage businesses.
But since mid-June, the bureau has averaged about one public enforcement action a week, totaling five in that span. The most recent was last week, when the CFPB announced a $30 million settlement with TCF Financial related to overdraft charges.
Banks and financial firms had hoped Mulvaney would drop most of the roughly 50 lawsuits and probes — of which about half are in active litigation — that he inherited upon taking the reins in November. But the court docket shows the CFPB has largely kept cases open or tried to resolve them.
After initially freezing all enforcement actions, Mulvaney now is trying to clear cases so the agency can move forward with new enforcement actions.
Lawyers are also paying close attention to CFPB declarations in court filings that try to defang a company's defense that the agency's single-director leadership structure is unconstitutional.
Ironically, the CFPB under Mulvaney has previously sided with those questioning the agency's constitutionality. The issue came up in a case involving PHH Mortgage, where judges had ruled that the president's inability to fire former CFPB Director Richard Cordray without cause violated the separation of powers. (That decision was overturned.)
Although the Trump administration took PHH's side in the matter, the recent CFPB filings argue that companies cannot launch a similar defense against Mulvaney because he is just an acting director, who can therefore be fired by the president at will. (Cordray was Senate-confirmed in the Obama administration.)
The recent enforcement activity conflicts with much of Mulvaney's public statements, which have questioned the constitutionality of the CFPB's broad power and characterized the orders brought by Cordray as excessive.
"I could have dismissed all 26 lawsuits the day I walked in the door," Mulvaney said in a speech in April. "I didn't because I thought some of them were pretty good, but that [power] was vested in me without any accountability whatsoever. I don't think that's right."
Earlier this month, the CFPB permanently barred a payday loan debt collector from working in the industry, and fined an Alabama small-dollar lender over excess interest charges. In June, Citibank agreed to give $335 million in refunds to consumers for miscalculating credit card rates and Security Finance, a South Carolina installment lender, was fined $5 million for illegal debt collection practices.
Lawyers say the mix of consent orders is similar to the pattern of cases filed under Cordray, with some large and small companies, including banks and nonbanks. A major difference is that the CFPB's press releases under Mulvaney tend to be short and do not have the often inflammatory language that companies complained about under Cordray.
"I think there's been a lot of rhetoric around [Mulvaney's] ... leadership, but the actual content of the enforcement actions has not changed that much," said Allen Denson, a partner at Hudson Cook.
Currently, the CFPB is facing constitutional challenges from at least five companies probed by the agency: All American Check Cashing, Ocwen Financial, RD Legal Funding, T3Leads and Think Finance. Similar to the PHH argument, the companies claim that the CFPB's single-director structure is unconstitutional, and that their cases should therefore be dismissed.
In February, the CFPB claimed in court filings in the All American Check Cashing case that Mulvaney can cure all of the agency's constitutional deficiencies simply by ratifying a lawsuit.
The CFPB argued that because Mulvaney is the acting director, not the permanent one, he can be removed by the president for cause, so a court should not even address constitutional issues.
"Because Acting Director Mulvaney is removable at will and has ratified the decision to bring this case, Defendants cannot obtain dismissal on the ground that this case was initially filed by an agency led by a Director removable only for cause," the CFPB said in a brief filed with the U.S. Court of Appeals for the Fifth Circuit. "Acting Director Mulvaney’s ratification cured any constitutional problem with this case’s initiation. In light of these events, defendants’ constitutional challenge no longer applies."
Marc Gottridge, a partner at Hogan Lovells, said judges have so far rejected the CFPB's argument in both the All American Check Cashing and RD Legal cases.
"The CFPB is in an impossible position because this administration is on the record saying the structure of the agency is unconstitutional so they are trying to finesse it by asking the courts to consider the constitutionality issue to be moot," Gottridge said.
Jenny Lee, a partner at Dorsey & Whitney, agreed that Mulvaney is trying to both sidestep the constitutionality issue in court while also claiming elsewhere publicly that the CFPB fits "the definition of tyranny."
At a congressional hearing in April, Mulvaney begged Sen. Tom Cotton, R-Ark., to take away the CFPB's power.
"I don't know if any director of any bureaucracy has ever come to you and said please take my power away, but that is what I am doing," Mulvaney said.
"The fact that the CFPB is building a technical legal argument on the Federal Vacancies Reform Act shows that Mulvaney really doesn't want to admit taking a position in court on whether the agency is unconstitutional because he doesn't think he can defend that under the law," Lee said.
Still others have suggested that Mulvaney is trying to tee up a case for the Supreme Court to rule on the CFPB's constitutionality.
In January, the U.S. Court of Appeals for the D.C. Circuit, ruling in the PHH case, said having a single-director structure, as opposed to a commission, does not violate the constitution.
The appeals court had overturned an earlier ruling by Judge Brett Kavanaugh, President Trump's nominee to the Supreme Court, who had ruled that the CFPB is unconstitutional and that the so-called "for cause" provision should be struck down, allowing the president to fire the director at will.
Last month, Chief District Judge Loretta A. Preska of the U.S. District Court for the Southern District of New York ruled that the CFPB is unconstitutional, setting up a potential split; the appeals court in the Fifth Circuit is still deciding on the constitutionality issue.
Gottridge said Mulvaney and the Trump administration now are stuck between a rock and a hard place.
"If Mulvaney claims the CFPB is unconstitutional, then it has no business enforcing the laws and bringing any cases," Gottridge said. "Mulvaney has a desire to protect the enforcement powers of the agency but they are in a bit of a pickle, and they are trying their best to avoid the constitutionality issue."