The Consumer Financial Protection Bureau’s new rule allowing class-action lawsuits in finance could be the last straw for banks, a top banking regulator warned Monday.
Keith Noreika, the acting comptroller of the currency, said the consumer bureau’s newly finalized rule opening up banks to class-action lawsuits “may turn out to be the proverbial straw on the camel’s back.”
Nevertheless, he announced, his agency will not lobby within the government to stop the rule from going into effect. Instead, he encouraged Congress to strike down the regulation through the Congressional Review Act.
The Republican-led House voted last week to undo the rule. Passage in the Senate, where Republicans have a two-vote margin, is not assured.
The rule would prevent financial companies from writing contracts for their products that require customers with disputes to go into private arbitration. The effect of the rule would be to encourage more class-action lawsuits, a prospect that Republicans have criticized as a giveaway to trial lawyers but that Democrats say is necessary to give consumers leverage over Wall Street. The rule was finalized by CFPB Director Richard Cordray, an Obama appointee.
Noreika, a Trump appointee reponsible for ensuring the safety and soundness of banks, had raised concerns about the impact of the rule on banks’ viability.
On Monday, he said that he is concerned that the rule could have unintended consequences and hurt banks. But he didn’t have enough time to petition to stop the rule within the Financial Stability Oversight Council, a super-group of regulators, he said.
