OMB director Mick Mulvaney. Credit: White House

The Consumer Financial Protection Bureau is moving to stop at least two companies from continuing to argue that enforcement actions should be dismissed based on an alleged defect in the agency’s power structure.

Defense lawyers for the companies—the mortgage loan servicer Ocwen Financial Corp. and All American Check Cashing Inc.—had raised constitutional claims that challenged the authority of Richard Cordray, the Obama-appointed director of the agency.

The companies argued that, because the president could only fire Cordray for cause rather than at will, the agency’s lawsuits should be dismissed. The CFPB sued Ocwen in the Southern District of Florida, and the complaint against All American Check Cashing was brought in the Southern District of Mississippi. Many other CFPB targets have made similar arguments in federal courts across the country.

This week, CFPB lawyers told federal judges in Florida and in Mississippi there’s a problem with these arguments now: The Trump-appointed interim director, Mick Mulvaney, can be fired at will—and that he has “ratified” the decision to bring the cases against Ocwen and All American Check Cashing. If the two courts agree not to address the constitutional arguments, the companies would lose one avenue in their attacks against the CFPB’s lawsuits.

The CFPB’s arguments signal the agency, at least for now, is moving forward with the cases against Ocwen and All American Check Cashing—two suits that were initiated under Cordray’s leadership. The filings from Mulvaney and the CFPB were remarkable in that they reveal some insight into Mulvaney’s ongoing review of administrative and enforcement actions. The agency has moved in other matters to drop cases and investigations.

A spokesman for Ocwen—represented by a defense team from Goodwin Procter, BuckleySandler and Greenberg Traurig—did not comment on the recent filing from the CFPB. “We have not briefed Acting Director Mulvaney or his staff on this matter, but would welcome the opportunity,” the company said.

Lawyers for All American Check Cashing, represented by Gibson, Dunn & Crutcher, were not immediately reached for comment. The CFPB declined to comment.

The new filings do not necessarily suggest Mulvaney has given his blessing to the Ocwen and All American lawsuits. Rather, the new filings could be an effort to avoid having CFPB lawyers continue to argue over the constitutionality of the agency’s structure.

That question was at the heart of a case in a Washington federal appeals court, which in January upheld the CFPB’s independent, single-director structure. In the Washington case, the U.S. Justice Department abandoned its earlier defense of the CFPB, and instead argued that the bureau’s director wielded too much power. Mulvaney himself is no fan of the power of the CFPB’s single-director structure.

So far, the U.S. Court of Appeals for the D.C. Circuit is the only court to rule on the single-director structure.

CFPB lawyers said Ocwen’s constitutional challenge “no longer applies” in light of Mulvaney’s appointment and ratification of the lawsuit.

“Because Acting Director Mulvaney is removable at will and has ratified the decision to bring this case, [Ocwen] cannot obtain dismissal on the ground that this case was initially filed by an agency led by a director removable only for cause,” the enforcement attorneys wrote. “Acting Director Mulvaney’s ratification cured any constitutional problem with this case’s initiation.”

Mulvaney, according to the new filings, had “carefully considered” the original decision to bring the lawsuit. “After having been briefed by bureau staff regarding this case, I ratified the bureau’s decision to file a lawsuit against [Ocwen],” Mulvaney wrote in a declaration.

Venable LLP partner Gerry Sachs, a former CFPB enforcement attorney, said it’s too early to make predictions about where the CFPB’s new leadership will take the agency. “While Acting Director Mulvaney has sought a review of regulations, reorganized the CFPB offices, and closed some cases, he is also allowing others to proceed,” he said.


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