Consumer Financial Protection Bureau building in Washington, D.C. June 4, 2013. Photo by Diego M. Radzinschi/THE NATIONAL LAW JOURNAL

A judge on Wednesday refused for the second time to block the Trump administration's appointment of White House budget director Mick Mulvaney as the temporary leader of the Consumer Financial Protection Bureau, setting the stage for a Washington federal appeals court to take up the power struggle.

The decision by U.S. District Judge Timothy Kelly, a Trump administration appointee, marked another setback for the deputy director, Leandra English, in her quest to lead the CFPB while the White House moves to install a Senate-confirmed successor to Richard Cordray, the agency's former head. Mulvaney already has moved to solidify his leadership, selecting his command staff and ordering a review of pending cases.

Kelly had previously rejected English's request for a temporary restraining order to prevent the administration from appointing an acting director. In a decision released Wednesday, Kelly doubled down on his belief that the Federal Vacancies Reform Act empowers the president to appoint a federal official already confirmed by the Senate to step in as the CFPB's acting director.

“Whether English or Mulvaney is entitled to be acting director, the CFPB remains part of the Federal Reserve System. Its new director, once appointed by the president and confirmed by the Senate, will have for-cause removal protections (subject to the outcome of pending litigation about the constitutionality of those protections),” Kelly wrote. “The CFPB will continue to receive funding from the Federal Reserve, instead of Congress. And the bar on other executive branch officers exercising control over the CFPB's communications with Congress about potential legislation will remain in place.”

English is “not likely to succeed on the merits of her claims, nor is she likely to suffer irreparable harm absent the injunctive relief sought,” Kelly wrote. “Moreover, the balance of the equities and the public interest also weigh against granting the relief. Therefore, English has not met the exacting standard to obtain a preliminary injunction.”

Represented by Deepak Gupta of Gupta Wessler in Washington, English sued days after Trump installed Mulvaney as the interim head. English wasn't able to appeal the first ruling on her request for a restraining order, but she faces no such obstacle in taking the preliminary injunction denial to a higher court.

“​We are disappointed in today's decision. ​The law is clear: President Trump may not circumvent the Senate confirmation process by installing his White House budget director to run th​e CFPB part time,” Gupta said in a statement Wednesday. “Mr. Mulvaney's appointment undermines the Bureau's independence and threatens its mission to protect American consumers.”

With his decision Wednesday, Kelly again supported the Justice Department's view that the Federal Vacancies Reform Act empowers the president to pick an acting CFPB director. The statute allows the president to temporarily fill certain vacancies with officials who are already confirmed to roles at other agencies.

Gupta had argued the Dodd-Frank financial reform law—which gave rise to the CFPB—names the deputy director as the interim leader. Also, he said, Mulvaney's appointment undercuts the independence of the CFPB, an agency whose director is supposed to be insulated from the White House.

Gupta pointed to a recent tweet in which Trump appeared to deny a Reuters report that Mulvaney is considering whether Wells Fargo should have to pay tens of millions of dollars over alleged mortgage lending abuses.

“I think that [tweet] shows you this isn't just some hypothetical concern,” Gupta said.

Chad Readler, the acting assistant attorney general for the Justice Department's civil division, argued that it is not unusual for a president to have some influence over an independent agency. In the early days of the CFPB, he said, the agency was led by now U.S. Sen. Elizabeth Warren, who at the time held the title of assistant to the president and special advisor to the Secretary of the Treasury.

“Its history comes directly from the White House and the Treasury [Department],” Readler said in court this month.

Gupta argued that Warren, in her role as assistant to the president, was charged with setting up the agency but lacked the power to implement new regulations or bring enforcement actions. Warren's role, Gupta said, was tailored specifically for the initial days of the CFPB's existence.

“The Senate understand there might be some lag time before they confirmed a director,” Gupta said.

Mick Mulvaney. Credit: Gage Skidmore via Wikimedia Commons

Against the backdrop of the legal dispute, Mulvaney has been putting his mark on the CFPB while splitting time between the agency and his Senate-confirmed role across the street at the Office of Management and Budget.

Shortly after taking the helm at the CFPB, Mulvaney imposed a temporary freeze on hiring—which he has since thawed—and new regulations.

The bureau this month said it will reconsider 2015 rules that were imposed under the Home Mortgage Disclosure Act and also will not assess penalties against mortgage lenders for any errors in data collected next year.

The consumer bureau also plans to amend its rule for prepaid accounts. The rule extended many common protections around credit cards to the prepaid card industry—a fast-growing market that caters to millions of consumers, including many with limited or no access to traditional bank accounts.

Republicans in Congress failed earlier this year to repeal the rule under the Congressional Review Act—a statute that was successfully used to erase the CFPB's regulation barring arbitration agreements that prevent consumers from filing class action lawsuits.

Mulvaney has been reviewing the CFPB's pending enforcement cases. Earlier this month, the CFPB agreed to suspend its investigation into the bail bond company Libre by Nexus while a judge considers a challenge to the agency's investigation. The CFPB accused the company of preying on detained undocumented immigrants.

This report was updated with comment about the decision.

The ruling is posted below: