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Sparring escalates over interim leader of U.S. consumer finance agency

WASHINGTON, Nov 26 (Reuters) - The White House's plan to appoint an interim leader for the top U.S. regulator for consumer finance came under further scrutiny on Sunday as a senior Democratic senator said the move would violate the Dodd-Frank Wall Street reform law.

Richard Cordray, a Democrat, stepped down on Friday as director of the Consumer Financial Protection Bureau, which was created after the financial crisis to protect consumers from abusive lending practices. He named Leandra English, the agency's chief of staff, as deputy director and said she would take over as acting director.

President Donald Trump then named White House budget director Mick Mulvaney, one of the CFPB's fiercest critics, to the position. On Saturday, the Justice Department said in a memo that the White House was right to name an interim CFPB director.

Dick Durbin, the U.S. Senate's No. 2 Democrat, told CNN's "State of the Union" on Sunday that he did not believe the Trump administration had the authority to appoint Mulvaney under the 2010 Dodd-Frank law, which created the agency.

"I read the provision," Durbin said. "It says that when the director steps aside, the deputy director shall be in charge of the agency - not may - shall be in charge, and so now there's an effort by Mick Mulvaney and the attorney general to really push him into this position so he can take away their power."

Both sides agree that Trump may nominate a permanent CFPB director, but that appointment might not happen for months because it requires Senate approval.

The CFPB, the brainchild of Senator Elizabeth Warren, a Democrat, has long been in the crosshairs of Republicans, who say it has had too much unchecked power.

According to the Department of Justice memo, the Dodd-Frank language about changing CFPB directors is "unusual" but the White House may name an interim chief. Such advice is open to legal challenge.

Administration officials say the 1998 Federal Vacancies Reform Act gives the president the power to temporarily fill agency positions, except for those with multimember boards - an exemption they said did not apply to the CFPB.

Republican Senator Lindsey Graham, also on "State of the Union," disputed the notion that the White House lacked authority.

"I think the president's on good ground here to appoint somebody under the vacancy statute," Graham said. (Reporting by Lindsay Dunsmuir and Joel Schectman; Editing by Lisa Von Ahn)