Despite the time it took to unsuccessfully sue President Trump, Lower East Side People’s Federal Credit Union would do it again.
The
Even though a judge eventually threw out the case, Linda Levy, CEO of Lower East Side People’s, believes bringing the suit was the right thing to do and was a move that in fact advocated for its primarily low-income CU membership.
Lawsuits of this caliber are a great way for institutions to get into the spotlight and put themselves on the map, experts say, but they cautioned that litigation such as Lower East Side People’s legal maneuver could also prove contentious and drive away business.
“Bringing a lawsuit like this means that you’re getting involved in a highly partisan political environment where many in the middle feel left out of it and are pretty tired of seeing this toxic tug-of-war between what’s perceived as the extremes of two political parties,” said Scott Wortman, a partner at Blank Rome who works with financial institutions on compliance and fintech related issues.
In the wake of Cordray leaving the CFPB, there was a clash about who should head the agency. In the hours before he left, Cordray named Leandra English, the agency’s chief of staff, as deputy director, setting her up to take over.
But Trump then appointed Mulvaney, and legal challenges ensued, including Lower East Side’s case. English even filed her own lawsuit in November in attempt to block Mulvaney from helming the agency.
Lower East Side People’s argued Mulvaney’s appointment violated the Constitution and that English should have been acting director until the president nominated a replacement who was then confirmed by the Senate. The credit union feared that Mulvaney would destroy the agency – one that the $55 million-asset Lower East Side staunchly supports.
“The Consumer Financial Protection Bureau plays a very important role in protecting consumers and the person that had been in our viewpoint illegally appointed to the position, Mr. Mulvaney, was going to do harm to the CFPB,” Levy said in a recent interview. “So we wanted to challenge the legitimacy of putting someone who was a known opponent of the CFPB and a known friend of the payday lending industry.”
The CFPB declined to comment for this story, citing that it doesn’t comment on legal and enforcement matters.
Lower East Side People’s ultimately lost its case after a judge dismissed it and rejected the credit union’s “fear-based theory of standing.”
Levy believes her credit union did see some benefit from the case, stating that the CU “made the point that the CFPB plays a critical role in protecting consumers.” Because of this, Levy said she would do it all over again.
But there can be challenges that also come with becoming involved in politics. For one, suing the president – and, for that matter, most lawsuits – can be expensive. A pro bono lawyer helped Lower East Side People’s during the seven-month long case but couldn’t afford to help the credit union appeal the decision.
Other credit unions were also unhappy about Lower East Side’s willingness to challenge the White House and the CFPB. Some feared that there could be retaliation against the industry. During the course of Levy’s lawsuit, both the
Wanted: CEO with a fighting spirit
Levy maintains her belief that the lawsuit didn’t impact the credit union industry.
“I’m sure [the lawsuit] had zero impact on their credit unions, so I don’t know why they had the reaction that they did,” Levy said.
The biggest concern shouldn’t be fear of retaliation from the federal government, but possibly damaging the perception of the credit union, Wortman said. Taking a political stance doesn’t align with the beliefs of the institution’s members could drive away business. It could also make it harder to do things, such as recruit talent for executive roles, Wortman added.
Lower East Side People’s is currently searching for a new CEO. Levy retired in April but has elected to stay on until a replacement is found. The
“Anybody that’s looking for an executive level job is doing research, and the first thing that will come up is this lawsuit,” Wortman said. “This lawsuit really stings of politicizing this business and it’s really a question of ‘Is that the culture that I’m walking into?’”
But Levy doesn’t believe the lawsuit has affected the executive search. This wasn’t the first time that Lower East Side People’s has raised controversy. The credit union is a known activist, banking Occupy Wall Street when the movement received donations and had no place to deposit them. Given this history and mission, challenging the Trump administration was less likely to offend members and drive business away.
Additionally, the lawsuit could be viewed as fighting for those the CU serves. Its field of membership includes New York City residents who make $48,500 or less or live in public housing developments.
Although Lower East Side lost its case, Levy continues to believe in the critical role that the CFPB holds. Mulvaney is no longer running the agency, but Levy doesn’t have much praise for
“So my guess is that she is going to continue dismantling the agency,” Levy said.
