The lawyer who wrote the Office of Legal Counsel memo supporting the Trump administration’s viewpoint that the president can appoint Mick Mulvaney as acting director of the Consumer Financial Protection Bureau represented a payday lender in front of the CFPB last year.
Steven A. Engel wrote the memo for OLC, which has been criticized by academics for seeking a conclusion and working backward to justify it. Engel was confirmed as an assistant attorney general earlier this month by a voice vote in the Senate.
But in July 2015, Engel was one of two lead counsels for NDG Financial Corp., a Canadian payday lender that CFPB cited for running a nine-year scheme to use its foreign status to offer U.S. customers high-cost loans that were at odds with state and federal law. “We are taking action against the NDG Enterprise for collecting money it had no right to take from consumers,” said CFPB Director Richard Cordray at the time. Engel was active in the case up until August of this year.
The revelation underscores the extent of industry infiltration of the structure designed by Congress — a single permanent director who can only take office upon appointment by the president and confirmation by the Senate — to keep the consumer watchdog independent of the industry it is set up to regulate, and buttresses the original intent of the lawmakers who established the agency.
CFPB alleged that NDG, which issues and collects payday loans online, made “false threats” to consumers that non-payment would result in wage garnishment, arrest, or imprisonment. The web of companies in the enterprise, situated in Canada and Malta, did not have the legal right to debit accounts to collect payday loans in the U.S., but they hid behind their foreign status to claim that they were exempt from various limitations and statutes. The case is still active in federal court in New York.
Engel represented the defendants in the case against CFPB as recently as this August, when U.S. District Judge Colleen McMahon asked judges in Canada to compel testimony from Canadian banks. At the time, Engel was a partner at the law firm Dechert. He was nominated to become an assistant attorney general for OLC in February of this year.
Having a former adversary to CFPB weigh in on who is the legal acting director of the agency raises questions over Engel’s independence and potential conflict of interest.
In the OLC memo, Engel argued that the Federal Vacancies Reform Act allows President Donald Trump to name Mulvaney as acting director of CFPB, instead of the current deputy director, Leandra English. In response, English has sued the president and Mulvaney, seeking an injunction to prevent the appointment.
The situation has caused chaos within the agency, which has the mission of safeguarding consumers against unscrupulous financial products. The CFPB’s general counsel, Mary McLeod, issued a three-page memo over the weekend agreeing with OLC’s take and saying that personnel should “act consistently with the understanding that Director Mulvaney is the Acting Director of the CFPB.” McLeod leaned heavily on the OLC memo in her analysis, which was bitterly contested by several legal scholars.
Some have suggested that internal politics played a role in the CFPB general counsel memo, with a split between those who want to play nice with the new regime and those who want to retain the agency’s independence. There is additional talk of unhappiness inside the building with the English selection over the former acting deputy director, David Silberman.
The Justice Department did not respond to a request for comment about Engel and whether he should have recused himself from matters involving the CFPB.
TOP PHOTO: Former Consumer Financial Protection Bureau Director Richard Cordray testifies during a hearing before the TARP, Financial Services and Bailouts of Public and Private Programs Subcommittee of the House Oversight and Government Reform Committee January 24, 2012 on Capitol Hill in Washington, DC. The hearing was to focus on the Consumer Financial Protection Bureau. (Photo by Alex Wong/Getty Images)