After initial reviews of the Consumer Financial Protection Bureau’s data and analysis underlying the Bureau’s final rule on arbitration agreements, Acting Comptroller of the Currency Keith Noreika remains concerned that the rule will adversely affect financial institutions and their customers.
According to Noreika, the final rule will prevent banks from using a risk mitigation tool and eliminate one option consumers have to resolve their concerns without the cost and delay of litigation, leading to decreased availability of products and services, increased related costs, fewer options to remedy consumer concerns, and delayed resolution of consumer issues. "The rule may turn out to be the proverbial straw on the camel’s back," said Noreika.
Because the CFPB failed to provide the OCC with data for its analysis before publishing its rule in the Federal Register (see Banking and Finance Law Daily, July 18, 2017), Noreika has stated that the Office of the Comptroller of the Currency cannot complete its review in the limited time before a petition must be filed with the Financial Stability Oversight Council, pursuant to Section 1023 of the Dodd-Frank Act. However, he added that he will not petition the FSOC to stay the effective date of the rule. Instead, he hopes that Congress will take action to "preserve effective alternatives for consumers to resolve their disputes without lengthy and costly litigation."
States defend rule. Massachusetts Attorney General Maura Healey has led a coalition of 20 attorneys general in urging Senate leaders not to repeal the CFPB’s arbitration rule, which would stop companies from forcing consumers to sign away their legal rights. "As state attorneys general, we have spent decades fighting companies that trick consumers into terms and fees buried in the fine print," Healey said. "This rule would put an end to hidden clauses that prevent consumers from going to court and banding together to fight unfair and illegal practices. We urge the U.S. Senate to keep the Rule in place so that all consumers have a chance to be heard in court."
The House recently passed a Joint Resolution of Disapproval that would set aside the CFPB’s rule under the Congressional Review Act. The attorneys general are asking the Senate to oppose its version of the resolution (see Banking and Finance Law Daily, July 20, 2017), and support consumers’ rights to go to court to assert their claims against financial institutions.
The letter from the attorneys general emphasized that the rule would provide essential relief to consumers, hold financial services companies accountable for their misconduct, and provide ordinary consumers with meaningful access to the civil justice system.
The states that signed the letter include California, Connecticut, Delaware, Hawaii, Iowa, Illinois, Massachusetts, Maryland, Maine, Minnesota, New Mexico, New York, North Carolina, Pennsylvania, Rhode Island, Oregon, Washington, Vermont, and Virginia, as well as the District of Columbia and Hawaii’s Office of Consumer Protection.
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