CFPB's Cordray Says OCC Has No Right to Challenge Arbitration Rules
CFPB Director Richard Cordray fired back at Comptroller of the Currency Keith Noreika Friday, saying that the OCC cannot challenge the agency’s arbitration rules through a little-used process.
Cordray said that the OCC did not meet the statutory requirements needed to challenge the CFPB’s rules through the Financial Stability Oversight Council. In a letter to Noreika, Cordray said to meet the FSOC requirements, the OCC had to object to the rules earlier in the rulemaking process, which has taken two years.
“At no time during this process did anyone from the OCC express any suggestion that the rule that was under development could threaten the safety and soundness of the banking system,” Cordray wrote. “Nor did you express any such concerns to me when we have met or spoken.”
For instance, he said, as late as June 26, OCC staff said it had not objections to the arbitration rule.
The fight is a political one in addition to being a policy fight.
Noreika became acting comptroller in May, well into the rulemaking process. Before that, Thomas Curry served in that position. As an appointee of former President Obama, Curry is less likely than Noreika to have objected to the rule.
Noreika is an attorney specializing in financial services and has represented major banks in the past, including in cases involving the CFPB.
As acting comptroller, Noreika has not had to go through the confirmation process. Democrats have blasted his selection, contending that he has a variety of conflicts of interest.
The CFPB issued the controversial final rule on Monday.
Under the rule, companies still can include arbitration clauses in their contracts, but they may not use those clauses to stop consumers from being part of a class action lawsuit. The rule specifies the language that must be used in the contract.
The rule also requires companies to submit to the CFPB detailed information about claims and awards made in arbitration. That data eventually will be made public, with consumer names and identifying data removed.
In a June 10 letter, Noreika objected to the rule, saying that it could affect the safety and soundness of the banking system. And he cited a section of the Dodd-Frank Act that allows any FSOC member to ask the council to rescind a CFPB rule.
But in a memo to Cordray, David Silberman, the CFPB’s associate director of research, markets and regulation said that Noreika’s belated statement that he has “unspecified safety and soundness concerns” does not meet the FSOC challenge requirements.
Aside from the procedural issues, Cordray also said that the rule will not affect the safety and soundness of the banking system.
He said most depository institutions do not use arbitration agreements.
In addition, he said, since 2009, banks representing 47% of all credit card loans have operated without arbitration agreements. The OCC has not downgraded any of those banks, Cordray said.