WASHINGTON—The acting Comptroller of the Currency is hammering the Consumer Financial Protection for its final rule on arbitration clauses. Keith Noreika, writing in an op-ed in The Hill, said the rule does little to help consumers and will only drive up credit costs.
Noreika said that the Senate must soon determine whether the “rule achieves its intended purpose of increasing compliance with consumer protection laws and improving the treatment of consumers without creating other significant harm and increasing costs.”
The House, in July, passed a resolution expressing disapproval of the CFPB’s final rulemaking. Under the Congressional Review Act, legislators can vote to overrule new federal regulations with a joint resolution of disapproval within 60 legislative days after regulators have submitted the rule to Congress. The Senate has yet to vote on the resolution.
“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. Consumers deserve better, and so do small and regional banks,” Noreika said in the op-ed.
Noreika noted that in September, OCC economists completed their review of the CFPB’s analysis of the arbitration rule.
“Their review found the data actually show an 88% chance of the total cost of credit increasing, and the expected increase is almost 3.5 percentage points. That means a consumer, living week to week, could see credit card rates jump from an average 12.5% to nearly 16%. The CFPB failed to disclose that observed effect that was apparent in its data. For an agency that demands transparency from the companies it supervises, the omission is an appalling abdication of the Bureau’s responsibility to consumers,” Noreika said in The Hill.
Noreika noted that the CFPB’s own data also show that when consumers turn to arbitration, they receive higher settlements more quickly than when they are forced to rely on class action lawyers to fight their case.
“Class action lawsuits often involve more claimants and may generate big headline settlement figures, but the people making millions are the lawyers when the average individual payout of such suits is just $32,” he wrote.