'Dear Rich,' Dear Keith': Friendly in Their Letters, Foes Over Arbitration
Keith Noreika, acting comptroller of the currency, and Richard Cordray, director of the Consumer Financial Protection Bureau, are sparring over the CFPB's new, and controversial, push to restrict arbitration agreements that ban class actions in the banking and finance industries. Here's some of the back and forth between Keith and Rich.
July 17, 2017 at 05:35 PM
13 minute read
First it was the U.S. Justice Department, which this year abandoned its defense of the Consumer Financial Protection Bureau's independent, single-director structure against challenges in court.
Now, the CFPB has found another enemy within the federal government: the Office of the Comptroller of the Currency, led by ex-Simpson Thacher & Bartlett partner Keith Noreika.
Last year, the two agencies—along with the Los Angeles City Attorney's Office—partnered to reach a $185 million settlement with Wells Fargo & Co. over the bank's opening of up to 2.1 million unauthorized accounts. Now, under the Trump administration, the two agencies are butting heads over the CFPB's most high-profile move since the Wells Fargo settlement: a rule, finalized last week, restricting arbitration agreements that block banking and finance consumers from forming class actions.
The communication began with a “Dear Rich.”
On July 10, the day the rule was finalized, Noreika wrote to the CFPB to raise “safety and soundness” concerns about the agency's move against arbitration agreements that ban class actions. CFPB Director Richard Cordray, responding two days later, said he was “surprised to receive” Noreika's letter.
“At no time during this process did anyone from OCC express any suggestion that the rule that was under development could threaten the safety and soundness of the banking system,” Cordray wrote. “Nor did you express any such concerns to me when we have met or spoken.”
The pen-pal relationship continued Monday, in correspondence that intensified the inter-agency dispute. In his latest letter, Noreika, addressing his missive “Dear Rich,” asked that the CFPB delay the rule “until my staff has had a full and fair opportunity to analyze the CFPB data so that I am able to fulfill my safety and soundness obligations.”
Noreika continued: “Sharing the CFPB data would further transparency in our government, a goal that I am sure you share and is our obligation when engaging in rulemaking under the Administrative Procedure Act. Therefore, the OCC's request for the CFPB data should not add to the burden or obligation of the CFPB regarding this rulemaking.”
Noreika requested the CFPB delay the rule's publication in the Federal Register—a significant moment that sets off the 60-legislative-day window for Republican lawmakers to mount a challenge under the Congressional Review Act. That legislative tool has already been used to nullify more than a dozen regulations finalized at the end of the Obama administration.
GOP lawmakers are already laying plans to challenge the CFPB's rule. U.S. Sen. Tom Cotton, R-Arkansas, said he had “started the process of rescinding this rule using the Congressional Review Act.”
“The last thing Americans need is more anti-business regulation that will prompt frivolous lawsuits while hurting consumers,” he said. Cotton, a former Gibson, Dunn & Crutcher lawyer, is set to speak Wednesday at a U.S. Chamber of Commerce event—confronting the arbitration rule—in Washington.
A CFPB spokesman said Monday the agency is reviewing the latest letter from Noreika, whom President Donald Trump named in May to temporarily lead the OCC.
Cordray's letter to Noreika last week—which began “Dear Keith”—addressed the safety and soundness concerns. The CFPB has estimated banks and other covered entities would pay $523 million more each year for additional federal litigation “and a significant but smaller amount for additional state court litigation.”
“These costs would be borne by an industry with trillions of dollars in assets, and in which last year the banks alone earned over $171 billion in profits,” Cordray wrote. “In other words, if all of the projected costs were borne by banks (and they are not), the rule would reduce net revenue by [0].3 percent.”
Noreika on Monday told Cordray he appreciated his “reassurances that the final rule does not have any safety and soundness impact on the federal banking system.” But, he added, “As you know, the CFPB is, by design, not a safety and soundness prudential regulator.”
Neither Noreika nor Cordray are long for their leadership roles. Cordray's term expires next July, and Noreika will step down as soon as a permanent successor is installed. Trump has picked former One West CEO Joseph Otting to lead the OCC.
Cordray has remained mum about whether he might leave the agency before his term expires. That silence is aggravating some on Capitol Hill.
“If Director Cordray wishes to issue midnight rules, to hire or adjust the status of CFPB employees, to obligate CFPB funds or to accelerate agency investigations, he should first commit to serving his full term,” House Financial Services Committee chairman Jeb Hensarling, R-Texas, a chief Cordray critic, said last week. “If he will not do so, the honorable course of action would be to resign and leave such decisions to his successor.”
Related Articles:
|- CFPB Quarrels With OCC Over Arbitration Rule, Clayton's Agenda, and Uber Drivers Win Class Ruling: Roundup
- CFPB, Testing Trump and Republicans, Moves to Restrict Forced Arbitration
- The CFPB Wants to Create an Arbitration Database. Companies Will Hate That.
- Trump and Cordray Are 'Two Bulls Circling Each Other,' GOP Lawmaker Says
- CFPB Faces 'Rock and a Hard Place' in Pushing Arbitration Rule
First it was the U.S. Justice Department, which this year abandoned its defense of the Consumer Financial Protection Bureau's independent, single-director structure against challenges in court.
Now, the CFPB has found another enemy within the federal government: the Office of the Comptroller of the Currency, led by ex-Simpson Thacher & Bartlett partner Keith Noreika.
Last year, the two agencies—along with the Los Angeles City Attorney's Office—partnered to reach a $185 million settlement with
The communication began with a “Dear Rich.”
On July 10, the day the rule was finalized, Noreika wrote to the CFPB to raise “safety and soundness” concerns about the agency's move against arbitration agreements that ban class actions. CFPB Director Richard Cordray, responding two days later, said he was “surprised to receive” Noreika's letter.
“At no time during this process did anyone from OCC express any suggestion that the rule that was under development could threaten the safety and soundness of the banking system,” Cordray wrote. “Nor did you express any such concerns to me when we have met or spoken.”
The pen-pal relationship continued Monday, in correspondence that intensified the inter-agency dispute. In his latest letter, Noreika, addressing his missive “Dear Rich,” asked that the CFPB delay the rule “until my staff has had a full and fair opportunity to analyze the CFPB data so that I am able to fulfill my safety and soundness obligations.”
Noreika continued: “Sharing the CFPB data would further transparency in our government, a goal that I am sure you share and is our obligation when engaging in rulemaking under the Administrative Procedure Act. Therefore, the OCC's request for the CFPB data should not add to the burden or obligation of the CFPB regarding this rulemaking.”
Noreika requested the CFPB delay the rule's publication in the Federal Register—a significant moment that sets off the 60-legislative-day window for Republican lawmakers to mount a challenge under the Congressional Review Act. That legislative tool has already been used to nullify more than a dozen regulations finalized at the end of the Obama administration.
GOP lawmakers are already laying plans to challenge the CFPB's rule. U.S. Sen. Tom Cotton, R-Arkansas, said he had “started the process of rescinding this rule using the Congressional Review Act.”
“The last thing Americans need is more anti-business regulation that will prompt frivolous lawsuits while hurting consumers,” he said. Cotton, a former
A CFPB spokesman said Monday the agency is reviewing the latest letter from Noreika, whom President Donald Trump named in May to temporarily lead the OCC.
Cordray's letter to Noreika last week—which began “Dear Keith”—addressed the safety and soundness concerns. The CFPB has estimated banks and other covered entities would pay $523 million more each year for additional federal litigation “and a significant but smaller amount for additional state court litigation.”
“These costs would be borne by an industry with trillions of dollars in assets, and in which last year the banks alone earned over $171 billion in profits,” Cordray wrote. “In other words, if all of the projected costs were borne by banks (and they are not), the rule would reduce net revenue by [0].3 percent.”
Noreika on Monday told Cordray he appreciated his “reassurances that the final rule does not have any safety and soundness impact on the federal banking system.” But, he added, “As you know, the CFPB is, by design, not a safety and soundness prudential regulator.”
Neither Noreika nor Cordray are long for their leadership roles. Cordray's term expires next July, and Noreika will step down as soon as a permanent successor is installed. Trump has picked former One West CEO Joseph Otting to lead the OCC.
Cordray has remained mum about whether he might leave the agency before his term expires. That silence is aggravating some on Capitol Hill.
“If Director Cordray wishes to issue midnight rules, to hire or adjust the status of CFPB employees, to obligate CFPB funds or to accelerate agency investigations, he should first commit to serving his full term,” House Financial Services Committee chairman Jeb Hensarling, R-Texas, a chief Cordray critic, said last week. “If he will not do so, the honorable course of action would be to resign and leave such decisions to his successor.”
Related Articles:
|- CFPB Quarrels With OCC Over Arbitration Rule, Clayton's Agenda, and Uber Drivers Win Class Ruling: Roundup
- CFPB, Testing Trump and Republicans, Moves to Restrict Forced Arbitration
- The CFPB Wants to Create an Arbitration Database. Companies Will Hate That.
- Trump and Cordray Are 'Two Bulls Circling Each Other,' GOP Lawmaker Says
- CFPB Faces 'Rock and a Hard Place' in Pushing Arbitration Rule
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