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More Evidence that a For-Cause Removal of CFPB Director Corday Would Be Pretextual

posted by Adam Levitin

If Trump is planning on attempting to remove CFPB Director Richard Cordray "for cause" he's hardly going about it in a smart way.  The Trump administration keeps generating more and more evidence that any for-cause removal would be purely pretextual, which strengthens Corday's hand were he to litigate the removal order (as he surely would).  

First, the various causes that get bandied about (e.g., employment discrimination claims at the CFPB, settlements with auto finance companies) all seem to relate back to things that happened a few years ago in the Obama administration. If Cordray were engaged in malfeasance, inefficiency, or neglect of duty, don't you think the Obama administration would have done something about that?  It's not as if the so-called (alternative) factual basis for the various allegations are something new.  The fact that the Obama administration didn't remove Cordray suggests that any attempt by the Trump administration to do so on the basis of events from years prior is nothing but pretext for a politically motivated dismissal.  (One also has to wonder if there's some sort of laches argument Cordray could raise if the grounds for dismissal are stale.)

Second, Trump's apparently already interviewed people for the CFPB Director position.  If those interviews pre-date the conclusion of any investigative process, it points to any investigation being just for show, as there's not currently a job available. 

Third, there is the statement today that "personnel is policy" by Gary Cohn, Trump's chief economic advisor, in reference to the CFPB Director and other statements to the effect that the Trump administration seeks to effect broad changes at the CFPB by altering its "personnel".  Taken together this is pretty good public evidence that any for cause removal is pretextual--a change in personnel would be about pursuing a policy goal, not ensuring against inefficiency, malfeasance or neglect of office.  Given the strength of the public evidence, Cordray might well be able to get discovery on this issue, and who only knows what would come out in the non-public evidence, including, presumably, deposition of the President.  (I also wonder if Cordray would be able to get discovery on the President's business holdings, including his tax returns, given that the President's own personal business interests might be implicated by the removal decision.)  

Now remember, come July 2018, Cordray's term at CFPB will be up, and Trump will be able to nominate his own Director.  Why on earth would the Trump administration risk an ugly and potentially embarrassing litigation and minor Constitutional crisis when it's going to get its own man in the job relatively soon anyway?  

Follow the money.  If Cordray is able to stay in office for his full term, the CFPB will be able to complete its payday and arbitration rule makings. The payday rulemaking is going to substantially decrease the amount of payday lending, while the arbitration rulemaking is going to open up the courts to consumers against all sorts of consumer financial services companies, including banks. Those rule makings will be subject to being overturned under the Congressional Review Act in a filibuster-proof 50-vote Senate majority process, but it will require GOP lawmakers to cast a clear vote against ability-to-pay regulation of the payday lending industry or against the ability of consumers to vindicate their rights in court. Those are votes that they will get tagged with in the 2018, 2020, and 2022 elections, and it's quite possible that enough of them defect that there aren't 50 votes in the Senate. Moreover, if the last couple of weeks are any indication, there's a YUGE wildcard of where things will be politically in a few months. What all that means is that the surest way for the financial services industry to stave off the payday and arbitration rule makings is the remove Richard Cordray as CFPB Director before the rule makings are complete.  That's what this is all about.

It remains to be seen if Trump is foolish enough to pick this fight, especially given all the other fires he's lighting, but if so does, it's pretty clear that any removal would be pretextual, and the public statements and actions by the Trump administration only seem to strengthen Corday's hand in litigation.  



This sort of shooting-oneself-in-the-foot communications problem reminds me of when TCF Financial (yes, the one whose CEO's yacht is called the "Overdraft") sued the Federal Reserve over the Durbin Amendment rulemaking, and then proceeded to destroy the case with a press conference in which he admitted that debit cards are not a stand-alone product. Zeal doesn't always match with legal strategy.

I'm trying to figure out why we would ever think that the man who carried on for over a week about the size of the inauguration crowd would shy away from picking an ill-advised fight.

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