Financial protection agency in chaos as a Trump-backed appointment asks staff to 'disregard' rival director

The agency's employees have been receiving conflicting messages

Mr Mulvaney speaks at a news conference at the Consumer Financial Protection Bureau (AP)

A battle is underway at the US consumer financial watchdog as rival directors vie to take control of the agency – with President Donald Trump‘s handpicked choice showing up to the office and telling employees that he is now in charge.

Mick Mulvaney, who once called the American Consumer Financial Protection Bureau (CFPB) a “joke”, arrived at the Washington premises with a bag of doughnuts, and told employees to disregard orders from the other individual claiming the title of acting-director, Leandra English.

Ms English was named as temporary head of the agency by her former boss Richard Cordray, in a final move before he stepped down last week. After Mr Trump subsequently named Mr Mulvaney to the post, she then filed a lawsuit claiming she is the “rightful acting director”. Judge Timothy Kelly, a Trump appointee approved recently by the Senate, heard arguments on the case but did not immediately rule.

The government planned to file its response in the case on Monday night, and the judge said he'll read the filing and “go from there.”

Both sides have been pointing to fine print in federal statutes, claiming that they have the authority to oversee one of the most powerful banking industry regulators. Ms English’s lawsuit, which was officially filed on Sunday, asked for a temporary restraining order so that Mr Mulvaney could not be named acting director.

Mr Trump has a right to name a permanent chief of the CFPB, officials agree. However, there are duelling claims about who gets to lead the agency in the meantime.

The fight to control the 1,600-employee agency lays bare deep divisions between Republicans and Democrats over how to regulate Wall Street and protect consumers, with Republicans adamant that the CFPB has too much power and burdens banks with red tape.

Both Ms English and Mr Mulvaney even sent out conflicting email messages Monday morning, claiming the title of acting director.

“I hope that everyone had a great Thanksgiving. With Thanksgiving in mind, I wanted to take a moment to share my gratitude to all of you for your service,” Ms English’s note, which was signed “Acting Director” read.

Mr Mulvaney followed up shortly thereafter with his own message to the agency’s staff. “It has come to my attention that Ms English has reached out to many of you this morning via email in an attempt to exercise certain duties of the Acting Director,” Mr Mulvaney’s note read. “This is unfortunate but, in the atmosphere of the day, probably not unexpected.”

“Please disregard any instructions you receive from Ms English in her presumed capacity as acting director,” he continued. “I apologise for this being the very first thing you hear from me. However, under the circumstances I suppose it is necessary. If you’re at 1700 G Street today, please stop by the fourth floor to say hello and grab a doughnut.”

Mr Mulvaney, a former congressman, has been a vocal critic of the agency he is now looking to run. It’s a “joke … In a sick, sad way,” he said during an interview earlier this year with the Credit Union Times.

However, at the end his first the day inside the CFPB, Mr Mulvaney came out to face the cameras and tried to play down talk of his previous statements over the CFPB.

“This agency will stay open. Rumours that I’m going to set the place on fire, or blow it up or lock the doors are completely false,” he said. “I am a member of the executive branch of government. We intend to execute the laws of the United States.”

He said there will be a 30-day freeze on hiring and new rulemaking, as well as a freeze on payment from the civil penalties fund for at least 30 days. He said if there were statutory or legal guidelines, they would be met.

Mr Mulvaney said the day went smoothly, though he said the power struggle may be awkward for people who know Ms English. Responding to news reports about the conflicting leadership, he said, “There was one person today who showed up at work claiming to be director. She wasn’t here.”

He added: “In the ordinary world, if you don’t call, you don’t show, you don’t have a job the next day, but I’m not sure how it works here.”

White House press secretary Sarah Huckabee Sanders said at the daily press briefing that Mr Mulvaney has “taken charge” of the bureau and has the “full cooperation” of the staff.

Members of Congress reacted with outrage at the chaos they saw unfolding in the CFPB, which was set up as a part of Dodd-Frank Wall Street Reform and Consumer Protection Act. That law authorised the agency to protect consumers in the financial sector, and allowed it to oversee banks, credit unions, securities firms, payday lenders, mortgage-servicing operations, foreclosure relief services, debt collectors, and other financial companies in the United States.

“Americans deserve a full-time @CFPB director with a proven track record of fighting for them. Period,” Senator Chuck Schumer, the top Democrat in the Senate, tweeted of the chaos.

As for the former director, Mr Cordray, he said the matter should be settled by the courts.

“The law says that I shall appoint the deputy director, and I did so,” he said. “My understanding of the law is that the deputy director becomes the acting director upon my departure. If there are disagreements about those issues, then they should be settled in the courts.”

But Ms English’s push to be recognised as the acting director took a blow after a memo was released from Mary McLeod, the CFPB’s general counsel, saying she agreed with the White House that Mr Mulvaney should be recognised as acting director.

The Office of Legal Counsel, which acts as a legal adviser to the President, also argued that Mr Mulvaney, not Ms English, was the legitimate director of the department.

One solution to the issue of who runs the CFPB is for Mr Trump to nominate his own permanent director. But it may take several weeks for someone to be nominated and longer until the Senate confirms his or her appointment.