The Trump Treasury joined the fight over a new rule favoring class-action lawsuits Monday, saying that the Consumer Financial Protection Bureau erred in its justification for the major financial regulation.
The Treasury's publication of an 18-page analysis faulting the CFPB's rulemaking represents an escalation in an unusually public and hostile fight between regulators.
At issue is a rule the CFPB finalized in July that would bar financial firms from writing contracts that prevent customers from joining in class-action lawsuits against the firms, and instead steer them toward private arbitration. Republicans have criticized the rule as a giveaway to trial lawyers.
Richard Cordray, the Obama-appointed head of the bureau responsible for the rule, has faced sustained criticism from Keith Noreika, Trump's acting Comptroller of the Currency charged with regulating banks.
Noreika has second-guessed the CFPB's justification for its own rule and criticized the agency in letters and op-eds. His Office of the Comptroller of the Currency released a finding that the rule would burden banks enough to raise borrowing costs by up to 25 percent, potentially threatening the viability of some banks.
On Monday, the Treasury agreed with the comptroller's assessment, concluding that the CFPB's review was "limited in ways that raise serious questions about its conclusions and undermine the foundation of the Rule itself." In particular, the Treasury alleged that the CFPB didn't take into account how many new class-action suits there would be, or how much of the benefit of those suits would flow to trial lawyers rather than to consumers. It also said that the bureau shortchanged the benefits of private arbitration.
In response, CFPB spokesperson Sam Gilford said that the Treasury report "rehashes industry arguments that were analyzed in depth and solidly refuted in the final rule." Contracts that mandate arbitration for disputes allow companies to avoid accountability, Gilford added, citing recent high-profile scandals involving the megabank Wells Fargo and the credit bureau Equifax.
Financial firms have sued to stop the bureau's rule on the grounds that its own analysis of the costs and benefits of the rule was flawed.
Also, Congress could overturn the rule legislatively if the Senate can muster the votes. The House has already voted to cancel it.
Senate Democratic Leader Charles Schumer bashed the Treasury report Monday afternoon, saying in a statement that "the Trump administration has twisted itself into a pretzel to try to undermine a rule that protects consumers from unscrupulous actors like Equifax and Wells Fargo."
Some congressional Republicans have also sought Cordray's ouster. His term runs through next summer, but key figures in the party, such as House Financial Services Chairman Jeb Hensarling, have called on Trump to fire him before then.