Rule of Law

GOP readies counterpunch if Biden removes CFPB chief

Many expect President-elect Joe Biden will fire Consumer Financial Protection Bureau Director Kathy Kraninger after taking office, but a fight is already brewing over who would succeed her.

The Supreme Court ruled in June that the president can fire a CFPB director for any reason, but some Republicans are suggesting Biden would be constrained by statute from naming an acting director, setting up yet another power struggle over control of the agency.

Even though few dispute that Biden can remove the current CFPB chief before her term expires in 2023, a former deputy to Kraninger argues that such a move would likely still provoke a legal challenge over her replacement.

Brian Johnson, who served as the bureau’s No. 2 under both Kraninger and former acting CFPB Director Mick Mulvaney, says the Federal Vacancies Reform Act — which gives presidents latitude in certain cases — does not cover vacancies created by firings.

“There is a strong case to be made that the Federal Vacancies Reform Act does not apply to vacancies created by removal,” said Johnson, a partner at Alston & Bird. “In that circumstance the attempted appointment of an acting director and any actions taken by that acting director could be challenged.”

The Federal Vacancies Reform Act, which has frequently been used by the executive branch to install acting regulatory leaders, applies when an officer “dies, resigns or is otherwise unable to perform the functions and duties of the office.”

Johnson recently cited interpretations of the statute to mean that a president who fires an agency head to create a vacancy cannot bypass Senate confirmation to fill the post.

“Conventional wisdom again holds that President Biden would name an acting director to run the CFPB,” Johnson said in a recent post on the Alston & Bird website. “However, it is far from clear that he would succeed in doing so.”

Others say the statute is open to interpretation.

“It’s actually a pretty hard question and something the courts are going to have to resolve,” said Andy Hessick, a law professor and associate dean for strategy at the University of North Carolina at Chapel Hill’s School of Law. “I could easily imagine when Biden becomes president, he fires the director, appoints someone as acting director, and that person is immediately sued.”

Still others said the idea that the statute cannot be invoked after a firing is at odds with the law’s text and history.

“An officer who has been fired is ‘unable to perform the functions and duties of the office,’ ” said Brianne Gorod, chief counsel of the Constitutional Accountability Center. She noted that former Sen. Fred Thompson, one of the law’s authors, had explained during floor debate that Congress chose broad language to ensure that the law covers all situations when an officer cannot perform the duties of the job.

Johnson maintains that the vacancies act cannot be invoked after a firing. That would mean the Dodd-Frank Act would be the default statute, and the CFPB’s current deputy director, Tom Pahl, would automatically become acting director.

“Tom Pahl could say that in the absence or unavailability of Kraninger, he has a claim to serve as acting director,” Johnson said.

But Alan Kaplinsky, a partner and co-practice leader at Ballard Spahr, said he doubted that such a legal challenge could succeed.

“I think the Republicans are mistaken,” Kaplinsky said. “Biden might be fine with letting Tom Pahl succeed, but he would still be able to put his own person in that position, though the person would have to be at the CFPB in a senior position for some time.”

Kaplinsky cited a 2018 opinion from the Justice Department’s Office of Legal Counsel that claimed the Federal Vacancies Reform Act applies to firings. The Justice Department weighed in on President Trump’s ability to name Matthew Whitaker as acting attorney general, replacing Jeff Sessions, who had resigned in late 2018.

“Even if Attorney General Sessions had declined to resign and was removed by the President, he still would have been rendered ‘otherwise unable to perform the functions and duties of the office,’ ” the DOJ opinion stated. “As this Office recently explained, ‘an officer is “unable to perform the functions and duties of the office? during both short periods of unavailability, such as a period of sickness, and potentially longer ones, such as one resulting from the officer’s removal.'”

Of course, a smoother transition at the CFPB is possible if Kraninger resigns or Biden asks for her resignation and she complies. But many are gearing up for another legal battle given that the bureau has been in the cross-hairs before for both temporary and recess appointments.

Former CFPB Director Richard Cordray’s resignation in late 2017 and his eleventh-hour appointment of Leandra English as his successor created havoc and prompted a brief legal brouhaha over who was in charge.

Although the White House ultimately prevailed, for a few weeks the CFPB had two different people claiming to be the rightful head of the agency. English had sued to block the appointment of Mulvaney. A judge ultimately denied her claims, ending the standoff.

Last week, the Biden transition team named English to lead the review team for the CFPB, raising fresh concerns that another political clash is in the offing.

Some suggest that attempts to block the president’s appointment of an acting CFPB director would not make much headway.

“Of all the fights that are going to take place, I would be surprised if Republicans want to use political capital on a legal challenge like this at the CFPB,” said Ashley Taylor Jr., a partner at the law firm Troutman Pepper.

Kaplinsky said any wrangling could depend on whom Biden picks to fill the job temporarily. One candidate floated for the acting CFPB post is Patrice Ficklin, the bureau’s current director of fair lending, who has been a senior CFPB official under Cordray, Mulvaney and Kraninger.

“If it’s somebody like Patrice Ficklin who has been at the agency the entire period of time, Republicans would be hard-pressed to complain about her,” Kaplinsky said. “I don’t think we are going to end up with the kind of situation with Leandra English and Mick Mulvaney.”