The battle over who will lead the federal government’s top consumer financial watchdog agency is now headed to court.
The extraordinary fight, which intensified on Sunday night, adds to the uncertainty over the fate of the Consumer Financial Protection Bureau, a regulator created in the aftermath of the global financial crisis of nearly a decade ago. It encapsulates dueling visions of how the American financial system could be regulated, as President Trump moves to loosen regulation created under the Obama administration to rein in the financial industry.
Leandra English, the deputy director of the bureau, filed a lawsuit late Sunday night to block Mr. Trump’s choice of a temporary chief from taking control of the agency on Monday morning.
Mr. Trump has been seeking to install his budget director, Mick Mulvaney, as the agency’s acting director. The bureau had been a “total disaster” and needed new leadership to “bring it back to life,” Mr. Trump has said on Twitter. Mr. Mulvaney has been openly hostile to the consumer bureau, calling it a “sad, sick” joke and supporting legislation to eliminate it.
At stake is the immediate future of the consumer bureau — one of the last holdouts, within the federal government, against Mr. Trump’s efforts to strip away business regulations. While Mr. Trump can appoint his own director, confirmation could take months and slow down Republican efforts to defang the agency.
The dispute has elevated Ms. English to a national spotlight. Before her appointment, she was a low-profile career civil servant who joined the agency in its infancy and rose steadily through its ranks, serving most recently as its chief of staff. She holds degrees from New York University and the London School of Economics, and previously held senior positions at the Office of Personnel Management and the Office of Management and Budget.
The Consumer Financial Protection Bureau was created six years ago to oversee a wide variety of financial products, including mortgages, credit cards, bank accounts and student loans.
Under the leadership of Richard Cordray, the departing director, the bureau aggressively used its powers to develop new rules and punish companies that broke existing ones. It targeted abusive debt collectors and bolstered protections for mortgage borrowers. Under Mr. Cordray, it won nearly $12 billion in refunds and canceled debts for 29 million consumers.
But that put it in the cross hairs of industry critics and many Republicans, who cried overreach.
“Wall Street hates it like the devil hates holy water,” Senator Dick Durbin, an Illinois Democrat, told CNN on Sunday.
Republicans have argued that the agency under Mr. Cordray has held back growth and innovation. They have criticized how he ran the agency in dozens of appearances on Capitol Hill.
To protect the agency from political interference, Congress gave it unusual independence and autonomy. The bureau’s leader, who serves a five-year term, is one of the few federal officials the president cannot fire at will.
The current standoff was triggered by the resignation of Mr. Cordray, who abruptly stepped down on Friday. His departure came eight months before his term was scheduled to end.
Ms. English, an agency veteran, was appointed to the deputy director position hours later. In a letter, Mr. Cordray said the appointment would make her the agency’s acting director under the terms of the law that created the agency.
But Mr. Trump is citing a different federal law in his effort to appoint Mr. Mulvaney. The dueling appointments left it unclear who would be running the agency on Monday.
Ms. English is looking to the United States District Court for the District of Columbia to resolve the dispute. The lawsuit she filed seeks a temporary injunction to halt Mr. Mulvaney’s appointment.
“The President’s attempt to appoint a still-serving White House staffer to displace the acting head of an independent agency is contrary to the overall statutory design and independence of the bureau,” Ms. English wrote in her lawsuit.
The White House and the consumer bureau did not respond to a request for comment.
Ms. English asked the court for an emergency restraining order to prevent Mr. Trump from naming an interim leader for the agency. She also asked it to declare that she, not Mr. Mulvaney, is the agency’s acting director.
Mr. Mulvaney would be a “wrecking ball” at the agency, said Lauren Saunders, the associate director of the National Consumer Law Center, an advocacy group.
As the fight between the White House and the consumer agency unfolded over the holiday weekend, many expected that it would end in court.
The legal grounds that the Trump administration cited for Mr. Mulvaney’s appointment — a law called the Federal Vacancies Reform Act — is “is at the very least contestable,” said Marty Lederman, a law professor at Georgetown formerly with the Justice Department.
Ms. English’s claim is based on the wording of the Dodd-Frank Act, the 2010 law that created the bureau. It specified that in the “absence or unavailability,” the bureau’s deputy director is to step in as its acting head.
The court will need to decide which law takes precedence.