Treasury opposes arbitration rules for consumers suing banks
NEW YORK (AP) — The Trump administration has come out against a set of new regulations that would allow consumers to band together to sue their bank or credit card company.
A Treasury Department report released Monday takes aim at the Consumer Financial Protection Bureau’s so-called forced arbitration rules, which the agency finalized this summer. In the report, the department questions whether the rules are in consumers’ interests and says the agency failed to consider alternatives.
The report comes as Congressional Republicans are trying to rally support to pass a bill to override the CFPB’s new regulations. But the November deadline for passing an override under what’s known as the Congressional Review Act is approaching. The House has passed the bill but the Senate’s version has stalled.
“Based on (the CFPB’s) own data, it is far more likely that the rule will generate massive economic costs — borne by businesses and consumers alike — that dwarf the speculative benefits,” the Treasury report says.
While the report criticizes the CFPB’s new rules, it does not call for them to be repealed. But it is likely to be ammunition for Republicans who want to get the rules overturned before the deadline expires.
The CFPB is an independent agency whose director was appointed by President Barack Obama. The agency has long been a target of congressional Republicans, who believe the bureau was given too much executive authority and not enough oversight when it was created after the financial crisis.
The banking industry and its lobbyists have been pushing hard to overturn the CFPB’s new regulations. If allowed to go into effect in 2019, they could expose banks to large class-action lawsuits, a possibility that has taken gotten more attention following the sales practices scandal at Wells Fargo and the security breach at credit company Equifax.
Democrats and liberal-leaning consumer advocates were quick to denounce the Treasury Department report. The CFPB itself took the unusual step of criticizing a fellow federal government office for its report.
“This report and similar industry analyses fail to make the case for allowing companies to continue using these clauses to deny consumers their day in court,” said CFPB spokesman Sam Gilford.