In an internal email to CFPB staff (discussed here), Director Cordray announced that he will be stepping down by the end of the month. Industry participants and observers have long speculated that Director Cordray might leave office prior to the expiration of his five-year term (July 2018) to run for governor of Ohio.
Upon his departure, Director Cordray will be succeeded by the Bureau's acting deputy director, David Silberman. The Administration is likely, however, to appoint a new acting director pursuant to the Federal Vacancies Reform Act. We have discussed—in the context of the now-defunct Arbitration Rule—how some of the various scenarios could play out. The Administration could select an acting director from three categories:
- The CFPB's Acting Deputy Director;
- An officer of another agency who has been confirmed by the Senate, with the most likely choice being a Treasury official; or
- A lower-ranking, non-confirmed CFPB official.
Some have speculated that Treasury Secretary Mnuchin could be chosen for the role, and delegate the authority of the director to another person under Section 1012(b) of the Dodd-Frank Act. A permanent new director would need to be nominated by the President and confirmed by the Senate.
The announcement of Director Cordray's departure, while not unexpected, comes as the Bureau faces challenges on legislative and judicial fronts, with congressional opposition to CFPB rulemaking under the Congressional Review Act, and a pending decision regarding the Bureau's constitutionality in the D.C. Circuit. This case, PHH Corp. v. CFPB, is before the en banc D.C. Circuit on appeal by the Bureau, and it is possible that the new CFPB leadership could seek to withdraw the appeal, essentially defaulting to the decision by the three-judge panel. If the appeal is upheld, the CFPB would need DOJ approval to seek review by the Supreme Court, regardless of who the Bureau director is—giving the Administration a control lever over additional proceedings.
A director, or acting director, chosen by the Administration would likely seek to slow the pace of the Bureau's rulemaking and enforcement actions. The CFPB has one final rule, the Payday Rule, although, as we have discussed, reversing course on final rules presents several challenges.
Similarly, investigations and enforcement actions are unlikely to stop completely, although a new director may be less willing to explore novel uses of the Bureau's authority, particularly as it relates to the Consumer Financial Protection Act's prohibition against unfair, deceptive, or abusive acts or practices. Today, for example, the CFPB filed a complaint against Think Finance, LLC, a software, analytics, loan servicing, and marketing company, for UDAAP violations arising from loans alleged to be void under various state laws. The complaint may represent the type of UDAAP argument that a new director seeks to step away from.
The Bureau has had many "firsts" since it was created, and we will be following closely how the CFPB handles the agency's first change in leadership.