A federal judge has dismissed a lawsuit over whether U.S. President Donald Trump can appoint his budget director as head of a consumer protection agency founded in the wake of the financial crisis of 2007-08.

The Consumer Financial Protection Bureau (CFPB) was created in 2011 by financial reform legislation designed to prevent a recurrence of the subprime mortgage scandal that resulted in untold numbers of home foreclosures in the United States. The banking crisis had worldwide repercussions, contributing to an economic downturn that lasted until 2012.

The CFPB was created as an independent agency during the Obama administration and tasked with writing and enforcing rules for financial institutions and tracking consumer complaints.

When Obama appointee Richard Cordray stepped down as CFPB director in 2017, he expected to be succeeded by his deputy, Leandra English. But Trump appointed Mick Mulvaney, director of the Office of Management and Budget, as acting director.

A federal credit union in Manhattan sought to block Mulvaney's appointment, saying the legislation under which the bureau was created mandates that Cordray's deputy become acting director — but in a decision made public on Friday, U.S. District Judge Paul Gardephe dismissed the case, saying the Lower East Side People's Federal Credit Union lacked the legal authority to sue.

Tighter rein

As acting director, Mulvaney has said he plans to rein in the agency, whose critics said acted too aggressively against financial institutions. Under his direction, the agency dropped a lawsuit against "payday lenders" that often charge very high fees and promised to review rules the financial industry has balked at.

In one of its highest-profile cases to date, the CFPB's Office of Fair Lending and Equal Opportunity took legal action against Hudson City Savings Bank for discriminatory lending. The bank paid a $25 million settlement in 2015 for "redlining," or discouraging prospective borrowers in black and Latino communities in New York, New Jersey, Connecticut, and Pennsylvania.

This week, according to The Washington Post, Mulvaney removed enforcement power from the Office of Fair Lending and Equal Opportunity, telling staffers in an email that their new focus would be on "advocacy, coordination and education." The unit was told it would now be under the office of the director.

Spokesman John Czwartacki said in a statement that the move had "enhanced [the unit's] ability to focus on its other important responsibilities."

But Vanita Gupta, head of the Leadership Conference on Civil and Human Rights, told the Post that eliminating the office's enforcement powers was "yet another step" toward defanging the watchdog agency.

The changes under the Trump administration "send a troubling message about the enforcement of civil rights laws, and will harm people, especially in communities of color," Gupta said.