The Treasury Department on Monday criticized the Consumer Financial Protection Bureau’s (CFPB) rule on arbitration, claiming it would impose “extraordinary costs” based on flimsy proof.
In a report released Monday morning, the department argued that CFPB failed to consider cheaper, more effective options for consumers than what it included in the controversial rule.
The report argues that the rule, meant to prevent financial services companies from blocking class-action lawsuits against them, would lead to 3,000 more suits over the next five years. The department claims those class-actions suits would impose more than $500 million in legal defense fees, giving $330 million to plaintiffs’ lawyers.
“The Bureau’s Rule would upend a century of federal policy favoring freedom of contract to provide for low-cost dispute resolution,” the report states.
“An agency implementing such a drastic shift in policy should typically subject its rulemaking to the rigors of cost-benefit analysis and require incremental efficiency justification for more stringent regulations,” the department wrote.
Critics of the CFPB rule say it limits cheaper options for both customers and businesses, benefitting trial lawyers instead of consumers. Supporters say the arbitration rule protects vulnerable consumers from being defrauded by companies without a chance to hold them accountable in court.
The CFPB said Treasury’s report “rehashes industry arguments that were analyzed in depth and solidly refuted in the final rule.”
“Banks, credit unions, and other companies file class action lawsuits to pursue justice when they are harmed as a group, and our rule restores consumers’ right to do the same.”
The Treasury report is the latest shot at the CFPB rule from Trump-appointed regulators. Acting Comptroller of the Currency Keith Noreika spoke against the arbitration rule soon after its July release, joining GOP lawmakers and business groups against the CFPB measure.
Noreika and CFPB Director Richard Cordray have since battled over the CFPB’s rule and the analysis backing it in public appearances and op-eds, some of which were published by The Hill.
GOP lawmakers are attempting to repeal the rule through the Congressional Review Act, which empowers Congress to undo agency rules within 60 days of their finalization. The House has passed a resolution to repeal the rule, and the Senate has a handful of legislative days left to act before the window closes.
“The House has already acted to protect consumers from the Bureau’s harmful rule; the Senate should do the same without further delay,” said House Financial Services Committee Chairman Jeb Hensarling (R-Texas).
Updated at 4:24 p.m.