Receiving Wide Coverage ... Ready for a fight: The Consumer Financial Protection Bureau issued a rule Monday stopping financial services companies from requiring customers to submit to arbitration to resolve disputes, “making it easier to bring class-action lawsuits,” the Wall Street Journal says. The move likely will “set off a showdown with the Trump administration and congressional Republicans.”
According to the Journal, some Republicans may use a legislative tool known as the Congressional Review Act to undo the rule. But CFPB Director Richard Cordray said his agency will proceed despite the opposition. Wall Street Journal, Financial Times here and here, American Banker
Richard Cordray, director of the Consumer Financial Protection Bureau, speaks at a Senate Banking Committee hearing in Washington, D.C., U.S., on Tuesday, Jan. 31, 2012. Republican lawmakers may escalate their criticism of the U.S. over estimates that its first rule would require nearly 7.7 million employee hours of work to comply. Photographer: Andrew Harrer/Bloomberg *** Local Caption *** Richard Cordray
Andrew Harrer/Bloomberg
According to the New York Times, the rule “would pry open the courtroom doors for millions of Americans, restoring their right to bring class-action lawsuits against financial firms. The change would deal a serious blow to Wall Street and could wind up costing financial firms billions of dollars.”
In a related development, the Senate voted 54-41 to confirm CFPB critic Neomi Rao to head the Office of Information and Regulatory Affairs, which reviews the costs and benefits of regulations issued by federal agencies. Five Democrats and one independent joined the Republican majority in confirming Rao, an associate professor of law at George Mason University. According to the Journal, in 2015 Rao “blasted” the CFPB in Congressional testimony, calling it “an especially stark example of the types of abuse that can result from overbroad delegations of authority to agencies.”
New man at the Fed: President Trump plans to nominate Randal Quarles, an investment fund manager and former Treasury Department official, to be the Federal Reserve’s first vice chairman for supervision. If approved by the Senate, Quarles “would put a more industry-friendly voice in perhaps the most powerful U.S. bank regulatory post,” the Journal said. Wall Street Journal, New York Times, American Banker, Washington Post
The Financial Times called Quarles’ nomination one of President Trump’s “most significant decisions to date in the realm of financial regulation.” It noted the position was created under the Dodd-Frank Act but never formally filled.
Wall Street Journal As pure as … bitcoin: Bitcoin has become a “trusted alternative” to other national currencies, which have often been “corrupted by politics,” according to Northwestern University law professor John O. McGinnis and Boies Schiller & Flexner LLP attorney Kyle W. Roche. “To continue to flourish, bitcoin does not have to become a more stable store of value than the U.S. dollar,” they write in a Journal op-ed. “It can climb the rungs of respectability by prevailing over less trustworthy currencies. The instability caused by problems with the euro, Brexit and the many Western democracies’ growing ratio of debt to gross domestic product threatens the value of even established currencies. Bitcoin is likely to succeed so long as the value of other moneys rests on politics.”
Financial Times Success: A Bank of England test of a new “interledger” payment method that allows for nearly instantaneous payments between two central banks appears to have turned up just one issue: "the availability of liquidity when processing wholesale cross-border payments." The program was developed by Ripple, the California-based blockchain company. “The test did not involve real money, nor any of the BoE’s core systems, or even use blockchain technology itself,” the paper reports. “However, the proof of concept announced on Monday evening marks an important moment for the blockchain community.”
Quotable “By restoring the ability of consumers to file or join group lawsuits, the rule gives companies more incentive to comply with the law. And the deterrent effect of such cases can more broadly influence the business practices of other companies as well.” — CFPB Director Richard Cordray.
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