OCC Set for FSOC Showdown with CFPB Over Arbitration Rule
In a letter to Consumer Financial Protection Bureau (CFPB) Director Richard Cordray, Acting Comptroller Keith Noreika of the Office of the Comptroller of the Currency (OCC) asked the Bureau to delay publishing its final arbitration rule and release data used to research the rule to the OCC for review. The CFPB’s arbitration rule would limit the use of mandatory arbitration clauses in contracts with financial institutions, opening the door to more class action lawsuits by consumers. Members of Congress and now top banking officials have levied concern over the potential costs and benefits of the arbitration ban. Comptroller Noreika is seeking the data to determine whether the rule could potentially destabilize the safety and soundness of the American banking industry, a concern that could trigger involvement by the Financial Stability Oversight Council (FSOC).
FSOC was created to “identify risks and respond to emerging threats to financial stability.” The voting members of the Council are:
- The Secretary of the Treasury (also acts as the chair of the council)
- The Chairman of the Board of Governors of the Federal Reserve System
- The Comptroller of the Currency
- The Director of the CFPB
- The Chairman of the Securities and Exchange Commission
- The Chairman of the Federal Deposit Insurance Corporation
- The Chairman of the Commodity Futures Trading Commission
- The Director of the Federal Housing Finance Agency
- A Presidential Appointee with Insurance Expertise
One of the main responsibilities of FSOC is the coordination of regulatory efforts between member agencies, including information sharing and collection. The Council is currently split between Obama and Trump appointees, so overturning the rule through FSOC may pose a challenge. Congress is also exploring options under the Congressional Review Act to nullify the Bureau’s arbitration rule. FSOC only has a short window of 60 days to review the new rule before its implementation period begins, so action would be needed soon to disrupt the rule’s enforcement. The rule is expected to be published in the Federal Register on Wednesday.
