A senior U.S. Consumer Financial Protection Bureau official filed suit late on Sunday trying to prevent President Donald Trump from naming an acting head of the watchdog agency, but its top lawyer concluded Trump had the power to do so.
The moves were the latest dramatic developments in the fight over leadership succession of an agency created in 2011 under Democratic former President Barack Obama to protect consumers from predatory lending practices. Republicans in the White House and Congress have tried to weaken the agency.
The leadership of the agency was plunged into confusion on Friday after its outgoing Obama-era director Richard Cordray formally resigned and elevated his former chief of staff, Leandra English, to replace him on an interim basis until the Senate confirms a permanent successor named by Trump.
Hours later, the Republican president named Mulvaney -- his budget chief and a harsh critic of the agency -- as its acting director.
CFPB General Counsel Mary McLeod wrote a memo, first reported by Reuters, concurring with the opinion of the U.S. Justice Department that Trump had the power to appoint Mulvaney to the post.
White House budget director Mick Mulvaney
White House budget director Mick Mulvaney
WASHINGTON, DC - SEPTEMBER 08: White House Budget Director Mick Mulvaney speaks to members of the media after a House Republican Conference meeting September 8, 2017 at the Capitol in Washington, DC. Mulvaney was on the Hill to push for the Trump Administration's Hurricane Harvey relief and debt limit package. (Photo by Alex Wong/Getty Images)
Mick Mulvaney, director of the Office of Management and Budget (OMB), holds up what he described as U.S. President Barack Obama regulations during a White House press briefing in Washington, D.C., U.S., on Thursday, July 20, 2017. Mulvaney has called Trump's tax-cutting approach to the economy MAGAnomics, a spin on Trump's campaign slogan, 'Make America Great Again' and has repeatedly attacked the Congressional Budget Office (CBO) for its estimates on the impact of Republicans' plans to repeal and replace Obamacare. Photographer: Andrew Harrer/Bloomberg via Getty Images
Mick Mulvaney, Director of the Office of Management and Budget, speaks about 'MAGAnomics' during the daily press briefing in the Brady Press Briefing Room at the White House in Washington, DC, July 20, 2017. / AFP PHOTO / SAUL LOEB (Photo credit should read SAUL LOEB/AFP/Getty Images)
WASHINGTON, DC - JUNE 21: OMB Director Mick Mulvaney testifies during a Financial Services and General Government Subcommittee hearing on the budget for the Office of Management and Budget on Capitol Hill on June 21, 2017 in Washington, DC. (Photo by Astrid Riecken/Getty Images)
WASHINGTON, DC - Budget Director for President Donald Trump, Mick Mulvaney explains and defends the administration's 2018 budget to the House Budget Committee on Capitol Hill in Washington, DC Wednesday May 24, 2017. (Photo by Melina Mara/The Washington Post via Getty Images)
UNITED STATES - MAY 24: OMB Director Mick Mulvaney testifies before a House Budget Committee hearing in Longworth Building titled 'The President's FY2018 Budget' on May 24, 2017. (Photo By Tom Williams/CQ Roll Call)
Mick Mulvaney, director of the U.S. Office of Management and Budget (OMB), listens during a House Budget Committee hearing on U.S. President Donald Trump's fiscal 2018 budget proposal in Washington, D.C., U.S., on Wednesday, May 24, 2017. Trump would dramatically reduce the U.S. government's role in society with $3.6 trillion in spending cuts over the next 10 years in a budget plan that shrinks the safety net for the poor, recent college graduates and farmers. Photographer: Andrew Harrer/Bloomberg via Getty Images
WASHINGTON, DC - MAY 23: Office of Management and Budget Director Mick Mulvaney holds a news conference to discuss the Trump Administration's proposed FY2017 federal budget in the Brady Press Briefing Room at the White House May 23, 2017 in Washington, DC. Calling it a 'New Foundation for American Greatness,' the $4.1 trillion budget for would cut programs for the poor, including health care, food stamps, student loans and disability payments while offering big tax cuts for the wealthy. (Photo by Chip Somodevilla/Getty Images)
Mick Mulvaney, director of the U.S. Office of Management and Budget, center, holds a volume of the fiscal year 2018 budget while speaking with Davita Vance-Cooks, director of the Government Publishing Office (GPO), left, during a tour of the GPO production facility in Washington, D.C., U.S., on Friday, May 19, 2017. Presidentï¿½Donald Trumpï¿½will send to Congress on Tuesday a proposal for balancing the federal budget within 10 years through deep cuts to discretionary and safety net spending, according to a U.S. official. Photographer: T.J. Kirkpatrick/Bloomberg via Getty Images
WASHINGTON, DC - MAY 02: White House Press Secretary Sean Spicer (R) walks into the briefing room with OMB Director Mick Mulvaney (L) and Secretary of Homeland Security John Kelly (C), to brief the media on President Trump's budget, at the White House (Photo by Mark Wilson/Getty Images)
Mick Mulvaney, director of the Office of Management and Budget (OMB), right, speaks as Gray Davis, former governor of California, listens during the Leaders In Global Healthcare and Technology (LIGHT) conference at Stanford University in Stanford, California, U.S., on Thursday, May 11, 2017. The LIGHT conference gathers leaders from a broad cross-section of executives and top policy makers in the health-care field to discuss the latest developments, challenges and opportunities shaping the healthcare industry. Photographer: David Paul Morris/Bloomberg via Getty Images
WASHINGTON, DC - MARCH 16: Office of Management and Budget Director Mick Mulvaney arrives for a briefing in the Brady Press Briefing Room at the White House March 16, 2017 in Washington, DC. Mulvaney took questions about President Donald Trump's federal budget blueprint which was released Thursday. (Photo by Chip Somodevilla/Getty Images)
WASHINGTON, DC - MARCH 13: U.S. Health and Human Services Secretary Tom Price (L) and Office of Management and Budget Director Mick Mulvaney talk to reporters following the release of the Congressional Budget Office report on the proposed American Health Care Act outside the White House West Wing March 13, 2017 in Washington, DC. Price said 'We disagree strenuously' with the findings of the CBO report about the Republican's attempt to repeal and replace the Affordable Care Act, or Obamacare. (Photo by Chip Somodevilla/Getty Images)
US Vice President Mike Pence (R) delivers remarks before swearing in Mick Mulvaney (L) as Director of the Office of Management and Budget in Washington, DC, on February 16, 2017. / AFP / NICHOLAS KAMM (Photo credit should read NICHOLAS KAMM/AFP/Getty Images)
WASHINGTON, DC - FEBRUARY 16: U.S. Vice President Mike Pence (C) Mick Mulvaney (L), swears as new Office of Management and Budget Director, as his wife Pam Mulvaney holds a bible during a ceremony in the Eisenhower Executive Office Building on February 16, 2017 in Washington, DC.
(Photo by Mark Wilson/Getty Images)
UNITED STATES - NOVEMBER 4: Reps. Mick Mulvaney, R-S.C., left, and Randy Hultgren, R-Ill., attend a House Financial Services Committee hearing in Rayburn Building titled Semi-Annual Testimony on the Federal Reserves Supervision and Regulation of the Financial System,' November 4, 2015. Federal Reserve Chairwoman Janet Yellen testified. (Photo By Tom Williams/CQ Roll Call)
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"I advise all Bureau personnel to act consistently with the understanding that Director Mulvaney is the Acting Director of the CFPB," McLeod's memo stated.
Late on Sunday, English sued in U.S. District Court in Washington, seeking a temporary restraining order blocking Trump from appointing Mulvaney. In the filing, English said Mulvaney had no experience in a consumer protection or financial regulatory role, had sought to get rid of the agency and once described it as a "sad, sick joke."
McLeod's intervention bolstered Trump's position and isolated English, 34, who has held multiple jobs at the CFPB since its creation.
White House spokeswoman Sarah Sanders said the Trump administration is aware of English's lawsuit, but said "the law is clear" and that Mulvaney is the acting director. Sanders pointed to McLeod's conclusion, adding that "there should be no question" that Mulvaney can take the job.
"It is unfortunate that Mr. Cordray decided to put his political ambition above the interests of consumers with this stunt. Director Mulvaney will bring a more serious and professional approach to running the CFPB," Sanders said.
Both sides in the battle say they have the law on their side.
Democrats have said the 2010 Dodd-Frank Wall Street reform law that created the agency stipulated that its deputy director would take over on an interim basis when a director departs until the Senate confirms a permanent director. Cordray named English as deputy director and said she would become the acting director.
"It's a very important fact ... their own general counsel came out with a different conclusion," said Alan Kaplinsky, head of the Consumer Financial Services Group for law firm Ballard Spahr LLP said. "Now that the thing is in court, I think it is really going to be in the hands of the judge."
Trump administration officials said the 1998 Federal Vacancies Reform Act gives a president the power to temporarily fill agency positions, except for those with multi-member boards, an exemption they said did not apply to the CFPB.
"The president's attempt to install a White House official at the head of independent agency -- while allowing that official to simultaneously serve in the White House -- is unprecedented," said English's lawyer, Deepak Gupta of the law firm Gupta Wessler, adding that "the law is clear" and that English is the acting director.
Created after the 2008 financial crisis, the CFPB has issued rules and imposed steep penalties on banks, auto dealers, student lenders and credit card companies.
Future enforcement activities could be stymied while the question of who runs the CFPB is decided.
Republican lawmakers argue that the agency wields too much unchecked power, adding that it burdens banks and credit card companies with unnecessary red tape.
Writing on Twitter, Trump on Saturday called the agency a "total disaster" that had "devastated" financial institutions. (Additional reporting by Andrew Chung, Lindsay Dunsmuir, Joel Schectman and Pete Schroeder; Editing by Will Dunham)