A government conflict over suing banks
Treasury, consumer agency at odds over regulations covering arbitration
NEW YORK — The Trump administration has come out against a set of new regulations that would allow consumers to band together to sue their banks or credit card companies.
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 Republicans are trying to rally support to pass a bill to override the 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.
The Treasury report says that based on the Consumer Financial Protection Bureau’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.”
While the report criticizes the new rules, it does not call for them to be repealed.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 Consumer Financial Protection Bureau 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 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 after the sales practices scandal at Wells Fargo and the security breach at credit company Equifax.
Democrats and liberalleaning consumer advocates were quick to denounce the Treasury Department report. The consumer bureau 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,” bureau spokesman Sam Gilford said.
On Wall Street Monday, industrial and tech companies and retailers all stumbled as stocks had moderate losses. General Electric suffered its worst one-day loss in six years after downgrades from analysts.