A lone credit union’s legal battle to oust Mick Mulvaney as acting director of the Consumer Financial Protection Bureau will likely turn on whether it has standing to sue.

The issue of whether the appointment has done harm to the financial institution was front and center last week, when the Lower East Side People’s Federal Credit Union fought against a Justice Department motion to dismiss its case.

Ilann Maazel, a partner at Emery Celli Brinckerhoff & Abady LLP who represents the credit union, argued that “as a regulated entity, the plaintiff here has a standing,” in the Southern District of New York before U.S. District Judge Paul Gardephe.

Mick Mulvaney, acting CFPB director.
The credit union argued that it cannot make long-term plans because it is unsure if acting CFPB Director Mick Mulvaney is legally in charge of the agency. Bloomberg News

In support of his argument, Maazel cited State National Bank of Big Spring v. CFPB, a suit brough by a Texas bank against the CFPB that argued the agency’s structure violated the Constitution’s separation of powers because it had no meaningful checks from any branch of government. In the Big Spring case, the court agreed that the bank had standing as a regulated entity of the CFPB.

But Gardephe questioned whether or not the court had “walked back” on language from Big Spring and what the counsel thought of the language, “standing is not dispensed in gross.”

Maazel suggested the notion that a regulated entity could not bring action against its regulator would give that entity only one other option: purposely break a law in order to trigger an enforcement action just to get its day in court. This was something Maazel was not willing to advise his client to do.

“In short, it really doesn’t matter,” Maazel said. “We don’t need to show any harm beyond what we just described. It is harmful to be regulated by an agency that cannot regulate you.”

Maazel also argued that the credit union could not make “long-range planning” for regulations since there was confusion about who might be the acting director when Mulvaney was appointed by President Trump while former director Richard Cordray left Leandra English to head the agency.

“The inability to do that is itself harm,” Maazel said.

The case is one of two in which supporters of English argue the Dodd-Frank Act makes it clear that the departing director can appoint his or her own temporary successor, while the Trump administration argues that the Federal Vacancies Reform Act allows the president discretion to make the appointment,

During oral arguments last week, U.S. Justice Department attorney Matthew Berns argued that the injury incurred by the bank in the Big Spring case was “actual or imminent” while the credit union’s injury was “conjectural or hypothetical.”

“Being an abstract injury, that is not sufficient to confer standing,” Berns said. “And that's not changed by the fact that plaintiff here has some sort of ideological interest in consumer protection. In Sierra Club v. Morgan, the court said that a mere interest in a problem like environmental or consumer protection is not sufficient by itself for a plaintiff to establish standing whenever the plaintiff faces some setback to its abstract social interest.”

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