Richard Cordray’s tenure as CFPB Director is uncertain

Ballard Spahr LLP
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Clients are always asking me and others in our Consumer Financial Services Group about how long Richard Cordray will remain as CFPB Director.  The short answer is nobody knows, perhaps not even Richard Cordray.  There are a number of factors, however, that lead me to believe that he will remain as Director until the end of his term on July 16, 2018 unless he voluntarily resigns before then to run for Governor of Ohio.

A Politico article yesterday reported that Gary Cohn, top White House economic aide, recently had a dinner meeting with Director Cordray at which he gave him an ultimatum:  resign or be removed by President Trump.  The article reported that Mr. Cohn had heard the rumors that Director Cordray wants to run for Ohio governor and, according to people familiar with the meeting, left the dinner thinking that the rumors were true.  According to the article, the White House decided to hold off on firing Director Cordray because President Trump “didn’t want to cause a sensation that could boost his candidacy and juice his fundraising.”

While it is very hazardous to predict what President Trump will do, I doubt whether he will try to remove Director Cordray either for cause or without cause.  As things now stand, the only event which could change my opinion would be if the Court of Appeals en banc in the PHH case were to reach the same conclusion as the 3-judge panel in the case – namely, that the CFPB was unconstitutionally structured and the appropriate remedy is to enable the President to remove the Director without cause – and the en banc judgment were to become final before Director Cordray’s term ends on July 16, 2018 (which is only 15 months away).  In my view, the likelihood of those events happening before July 16, 2018 is remote.

The recent filing of a brief  by the DOJ in the PHH case essentially urging  the en banc court to adopt the opinion of the 3-judge panel  suggests that President Trump will not jump the gun by attempting to remove Director Cordray before a final judgment in the PHH case authorizes him to do so.  An attempt by the President to remove Director Cordray for cause would likely trigger a legal challenge by Director Cordray that would outlast the expiration of his term unless his removal were to coincide with a decision by him to voluntarily resign to run for Ohio Governor.  Such a lawsuit would likely be stayed pending the outcome of the PHH case.  If President Trump intended to pursue a removal for cause, I believe he would have done so by now.  If he were to attempt now to remove Director Cordray for cause, that would also likely result in litigation that would outlast July 16, 2018 and, in the meantime, Director Cordray might remain in office.

Ultimately, I believe the length of Director Cordray’s remaining tenure at the CFPB will turn on whether he decides to run for Ohio Governor, and, if so, his view on when he needs to resign as Director to begin his campaign.

Even if Director Cordray remains at the CFPB for several months or longer, it does not necessarily mean that he will finalize any new regulations.  While he should have sufficient time to finalize at least the arbitration regulation, he may be deterred from doing so because of his concern that the rule will be overridden by Congress and President Trump under the Congressional Review Act.  Congress and President Trump have already overridden at least 13 final regulations issued by other federal agencies.

While Director Cordray may be deterred from finalizing any additional regulations, there is no reason to believe that there will be any let-up in his continuing pursuit of his enforcement and supervisory activities.  Indeed, the CFPB has initiated 9 enforcement actions since President Trump’s inauguration.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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