Well, the clock now is officially running with regard to the Consumer Financial Protection Bureau’s final rule prohibiting the use of class action waivers in arbitration clauses.

The rule appeared in the Federal Register on Wednesday, meaning that barring a literal act of Congress, this regulation is effective on Sept. 18.

While the industry certainly is gearing up for significant pushback before that date, one of the CFPB’s fellow regulators questioned how the new policy is structured.

Last week, acting Comptroller of the Currency Keith Noreika delivered a letter to CFPB director Richard Cordray spelling out several questions similar to ones raised by organizations such as the American Financial Services Association and the National Independent Automobile Dealers Association. The Office of the Comptroller of the Currency (OCC) wanted the data the CFPB used to develop and support the final rule.

“The OCC has a mandate to ensure the safety and soundness of the federal banking system. A variety of OCC staff have reviewed the CFPB’s arbitration proposal from this perspective and have expressed concerns about its potential impact on the institutions that make up the federal banking system and its customers,” Noreika wrote in a letter dated July 10.

“As you know, arbitration can be an effective alternative dispute resolution mechanism that can provide better outcomes for consumers and financial service providers without the high costs associated with litigation,” Noreika continued. “As some have noted, the CFPB’s proposal may effectively end the use of arbitration in cases related to consumer financial products and services. Eliminating the use of this tool could result in less effective consumer protection and remedies, while simply enriching class-action lawyers.

“At the same time, the proposal may potentially decrease the products and services offered to consumers, while increasing their costs. The proposal also may force institutions to confront ‘potentially ruinous liability’ and to settle unmeritorious claims to mitigate the significant costs and risks associated with class-action law suits,” Noreika went on to say.

Noreika then delved into how the new rule could impact the banking system and how finance companies and dealerships could tap its financial resources.

“The increased cost associated with litigation and the loss of arbitration as a viable alternative dispute resolution mechanism could adversely affect reserves, capital, liquidity, and reputations of banks and thrifts, particularly community and midsize institutions,” he wrote.

“While staff have raised these questions, we can only answer them through shared analysis of your agency's data,” Noreika added.

Cordray complied with the OCC’s request, making arrangements to send data to the agency on Tuesday, based on a statement sent to SubPrime Auto Finance News.

“I appreciate director Cordray’s decision to share his agency’s data and analysis used to develop and support the final rule that will be published in the Federal Register,” Noreika said. “Consenting to share the data is important progress. 

“I look forward to working with the OCC staff to conduct an independent review of the data and analysis in a timely manner to answer my prudential concerns regarding what impact the final rule may have on the federal banking system,” he continued.

SubPrime Auto Finance News also obtained the letter Cordray wrote to Noreika and the OCC regarding the data request. Cordray began by asserting his position on what the OCC sought.

“First, let me be clear that we are happy to share the data underlying our rulemaking. I understand that our teams are in communication and we are in the process of assembling the data your staff has requested,” Cordray wrote.

Then Cordray delved into wondering why the OCC might have issues with this arbitration ban.

“I continue to fail to see any plausible basis for your claim that the arbitration rule could somehow affect the safety and soundness of the banking system. The economic analysis of the rule shows that its impact on the entire financial system (not just the banking system) is on the order of less than $1 billion per year,” Cordray wrote.

“Even if you think that estimate could be off by some amount, the banks alone made over $171 billion in profits last year,” he continued. “So on what conceivable basis can there be any legitimate argument that this rule poses a safety and soundness issue?”

Cordray also mentioned that Congress explicitly banned arbitration agreements in the mortgage market, “which is larger than all these other consumer finance markets combined. Yet nobody suggests that outcome poses a safety and soundness issue.

“So while you may disagree with the policy judgments for the rule, I question why it would be appropriate to distort the Financial Stability Oversight Council (FSOC) process to review a claim that is so plainly frivolous, when congressional and judicial forums are available to pursue such matters,” Cordray continued.

“Again, I would be interested to know more about what you view as the basis for your claim here. As for timing, I signed the final rule and we sent it to the Federal Register for publication before you raised these issues on July 10. Feel free to call me anytime to discuss these matters further,” Cordray went on state.

And as far as that act of Congress, House Financial Service Committee chairman Jeb Hensarling certainly appears poised to use lawmaker powers to stop this rule.

“This bureaucratic rule will harm American consumers but thrill class action trial attorneys,” said Hensarling, a Texas Republican. “As a matter of principle, policy and process, this anti-consumer rule should be thoroughly rejected by Congress under the Congressional Review Act.

“In the last election, the American people voted to drain the D.C. swamp of capricious, unaccountable bureaucrats who wish to control their lives,” Hensarling continued. “Congress must work with President Trump to make good on this mandate by fundamentally reforming the CFPB and dismantling the administrative state.”

The clash in Congress over this CFPB rule is likely to mirror so many other conflicts occurring on Capitol Hill nowadays.

“I applaud the Consumer Financial Protection Bureau for finalizing this important rule to clamp down on forced arbitration,” said Rep. Maxine Waters, a California Democrat and ranking member of the House Financial Services Committee.

“No consumer should ever be forced to sign away their legal rights in order to open a bank account, obtain a credit card, finance a car or obtain a private student loan so that they can pursue their education,” Waters continued. “The bureau’s rule is a critical step in stopping this problematic practice, ensuring that financial institutions are held accountable, and protecting consumers, including service members and veterans.”