Why Rohit Chopra is Still the Director of the CFPB

Yesterday, in the wake of a Trump administration memo announcing a near-total freeze on government loans and grants, journalists and political observers were hurrying to understand the Congressional Budget and Impoundment Control Act and what it means for the White House’s power to influence government spending.

While that effort and analysis continue after a judicial injunction halting the freeze, members of the financial services and financial technology industries are trying to wrap their heads around another obscure U.S. law: the Federal Vacancies Reform Act. Specifically, these sectors are trying to determine what the statute, and its interplay with other federal laws, means for current and future leadership at the Consumer Financial Protection Bureau (CFPB).

Before we explain this obscure law, the Trump administration’s interpretation of it, and its history, let’s recap what is happening at the CFPB.

What Ever Happened To Rohit Chopra?
In the days and hours before noon on January 20, when President Donald Trump took office for the second time, the leaders of most federal agencies and boards, including the U.S. Securities and Exchange Commission and the Federal Deposit Insurance Commission, stepped down.

One individual remains in place, however: Consumer Financial Protection Bureau Director Rohit Chopra. The CFPB generally and Director Chopra specifically have been frequent targets of criticism from Republicans over the last four years, which makes Chopra’s staying power a bit head-scratching. While some sources have reported that Director Chopra has packed up his office and that his photo has been taken down from the bureau’s headquarters, for the last 10 days, the Biden administration appointee has continued to bike to work at the CFPB. No edict from the White House saying “you’re fired” has yet arrived.

Does Director Chopra want to stay despite his ideological disagreements with the new president? The Wall Street Journal editorial board has said so, and to quote directly, has alleged Director Chopra is trying “to ingratiate himself with JD Vance in hopes of serving out his term.” When interviewed last week of CNBC’s Squawk Box, Director Chopra himself said, “I understand and I recognize that the president has the right to really put in place a new nominee, a new director of the CFPB, but until that time, I am discharging my oath to serve my term and we are very, very busy.”

Even though he remains in office, from a practical perspective Director Chopra cannot get much done right now. That’s because his powers were significantly curbed under a regulatory freeze executive order President Trump issued last week. Under that order, no federal agency may advance any rulemakings unless and until the administration has reviewed and approved them. (These orders have become standard practice for all new presidential administrations. Former President Joe Biden started his administration with one, too.)

As a result, the CFPB is currently limited to relying on its enforcement authority and the bully pulpit to advance policy. Both of those avenues are ones Director Chopra has shown an openness toward using over the last four years. Indeed, this past Monday, during a Federalist Society webinar on the topic, Director Chopra called for “bright line” prohibitions and greater transparency to combat allegations of politicized de-banking.

So, even if his rulemaking authority is curtailed, why has President Trump kept Rohit Chopra in place? Let’s turn now to the Federal Vacancies Reform Act.

What Is The Federal Vacancies Reform Act?
As the American Banker explained earlier this week, a group of federal laws governing interim appointments make it simply firing Chopra difficult for President Trump.

The first of these laws is the Federal Vacancies Reform Act of 1998. As the Government Accountability Office has defined it, this law establishes requirements for temporarily filling vacant executive branch agency positions that require presidential appointment and Senate confirmation. Specifically, the Vacancies Act identifies which individuals may temporarily serve, for how long they may serve, and what happens when no one is serving under the act and the position is vacant.

According to the Partnership for Public Service, under this act, three types of officials may carry out the duties of the office in an acting capacity without Senate confirmation. They are:

• The “first assistant” becomes the acting officer unless the president designates another individual from the other two eligible classes of officials. The Vacancies Act does not define “first assistant,” but the term is generally interpreted to mean a top deputy.
• The president may designate as the acting official an individual who serves in another Senate-confirmed position anywhere in the federal government.
• The president may designate as the acting official an agency employee who is paid at the GS-15 rate or above and who has been an employee of the agency for at least 90 of the past 365 days preceding the vacancy.

Additionally, the Vacancies Act exempts particular agencies from some or all of its provisions. These exemptions include:

• Anyone who is a member of a board, commission, or similar multi-headed agency that governs an independent federal establishment or government corporation who is appointed by the president with the advice and consent of the Senate.
• Any commissioner of the Federal Energy Regulatory Commission.
• Any member of the Surface Transportation Board.
• Any judge appointed by the president and confirmed by the Senate to an Article I court (such as administrative law judges, certain military judges, U.S. Tax Court judges.

Further complicating matters? As the American Banker explained, the Vacancies Act is not the only federal statute that has something to say about the structure and leadership of the CFPB.

Why Is The Situation With The CFPB Unique?
As noted above, only three types of officials may carry out the duties of the office in an acting capacity without Senate confirmation. Up until this point, the U.S. Department of Justice has interpreted the Vacancies Act as specifically prohibiting a Senate-confirmed member of a multi-person commission or board to an acting head of agency role. This reading would, for example, preclude a sitting FDIC board member or Federal Trade Commission commissioner from also serving as acting director of the CFPB. In tandem, the Federal Deposit Insurance Act provides that no more than three members of the FDIC can be from the president’s party and the Dodd–Frank Wall Street Reform and Consumer Protection Act requires that the director of the CFPB sit on the FDIC board.

As a result of this complex intersection of laws, there are concerns within the Trump administration that appointing a sitting FTC commissioner would be struck down through litigation, leaving Zixta Martinez, the CFPB’s Chopra-aligned deputy director, as the acting director of the CFPB. Additionally, Travis Hill, the acting chair of the FDIC, can’t be appointed to the CFPB, both because he sits on a multi-person board and because, as a sitting member of the FDIC board, there is some question as to how the FDIC board would be composed if he also took on the CFPB director’s seat.

That is why, up until this point, the Trump team’s thinking has been to wait for Scott Bessent or Russell Vought, the president’s nominee to lead the Office of Management and the Budget (OMB), to be confirmed by the Senate, at which point the president would also appoint one of them as acting CFPB director.

Bessent was confirmed yesterday. Vought may have some more time to wait — particularly given the OMB’s role in yesterday’s spending freeze memo. (Democrats have threatened to hold up the nomination, and even some Republican senators, including Sen. Susan Collins of Maine who chairs the Senate Appropriations Committee, have criticized the freeze.)

While we wait to see what President Trump will do about the CFPB directorship, it’s worth noting that calls to reform the Vacancies Act have grown in recent years and those calls have come from both sides of the aisle.

Time For Vacancies Act Reform?
Three years ago scholars from the libertarian think tank the CATO Institute wrote, “Over the last two decades … presidents of both parties have increasingly exploited a loophole in the Vacancies Act to turn temporary acting officers into de facto permanent officers. Eliminating this loophole is necessary to restore the proper role of the Senate in the appointment process.”

That argument sounds almost exactly like one from the Project on Government Oversight (POGO), a left-leaning organization, which has argued “the Vacancies Act’s limitations, ambiguities, and lack of enforcement over the 25 years since its passage have allowed presidents of both parties to manipulate it in ways that undermine its purpose.” It advises lawmakers to:

• Amend the Vacancies Act by reducing the amount of time acting officials can serve as agency heads, require acting officials to testify before Congress at least once every 60 days, and prevent presidents from appointing acting officials who lack the necessary experience and qualifications to lead an agency;
• Mandate that an agency-specific succession statute takes precedence over the Vacancies Act to ensure clarity;
• Create a task force that builds on past efforts to reduce the roughly 1,200-1,400 political appointees subject to Senate confirmation; and
• Clarify whether the Vacancies Act applies if a president fires an official.

None of these reforms will happen in the time it takes to decide Rohit Chopra’s fate. In the meantime, we wait.