Acting OCC Comptroller Keith Noreika and CFPB Director Richard Cordray Spar Over Arbitration Rule
10/18/2017 3:08 PM
Noreika has long opposed the rule and the CFPB’s processes; Cordray defends it as a mechanism to protect consumers.
In an opinion piece published in The Hill, Acting U.S. Comptroller of the Currency Keith Noreika called for the Senate to vacate the Consumer Financial Protection Bureau’s final rule to ban class action waivers in arbitration agreements in contracts for consumer financial products.
“In my view, the CFPB has failed to provide the data to support that case and failed to disclose the costs to consumers that will likely result from the rule’s implementation,” Noreika writes.
CFPB Director Richard Cordray responded to Noreika’s piece with his own column in The Hill calling the acting comptroller’s effort a “second gratuitous attempt to undermine the evidence that supports our rule.”
Noreika writes that his questions about the rule included its “impact on the safety and soundness of community banks and its effect on consumers that the CFPB’s analysis did not answer. I asked Director Richard Cordray to hold off publishing the rule so that the Office of the Comptroller of the Currency could conduct an independent review of the data and analysis used to develop and support the rule.”
The rule was published in July and took effect on Sept. 18, 2017. Compliance with the rule will apply to pre-dispute arbitration agreements entered into on or after March 19, 2018.
Cordray writes, in response to Noreika, that he did not raise objections when the OCC consulted with the CFPB about the rule.
“Yet he [Noreika] abruptly asserted that the banks were existentially threatened by this simple rule, which does not even ban arbitration in consumer disputes,” Cordray writes.
Noreika and Cordray disagree on data that show the impact, benefits and cost of arbitration.
“If banning these clauses cannot demonstrably result in better treatment for consumers, we should not implement a rule that will likely result in substantially higher costs to consumers and harm to community banks,” Noreika writes.
However, Cordray responded, “The acting comptroller’s claim that the arbitration rule is somehow harming community banks and credit unions is also plainly wrong. Over 90 percent of the community banks and credit unions we studied do not even have these clauses in their checking account contracts.”
While a decision on the rule under the Congressional Review Act is pending in the Senate, it also faces challenges in the courts. Several financial trade groups, including the U.S. Chamber of Commerce, filed a lawsuit to overturn the rule.
Cordray writes in this column that the Senate does not need to decide the fate of the rule now that a lawsuit has been filed. “Wherever it is decided, however, the acting comptroller’s errant claims have no legitimate part to play in the ultimate determination.”
In his piece, Noreika concludes that, “Consumers know for themselves what their best options are, and their regulators need to know that too.”
Follow ACA on Twitter @ACAIntl and @acacollector or Facebook for news and event updates. ACA’s LinkedIn Group includes news updates, member discussions, event promotions, jobs and more. Visit the group page and request to join today. Subscribe to ACA Daily, Collector magazine and update your email subscription preferences by visiting the publications page. ACA members can get email notifications when each new digital issue of Collector magazine is available by logging in here; members and nonmembers can also purchase a print subscription. Nonmembers can create a guest profile on ACA’s website to subscribe to available publications.