WASHINGTON — In a further rollback of Obama-era regulations, the Republican-led Senate voted narrowly to repeal a banking rule that would have allowed consumers to join together to sue their bank or credit card company to resolve financial disputes.
Vice President Mike Pence cast the final vote late Tuesday to break a 50-50 tie. Maine Sen. Susan Collins, a Republican, voted to repeal the rule, while Sen. Angus King, an independent who caucuses with Democrats, voted against its repeal.
The banking industry had been lobbying hard to roll back the regulation from the Consumer Financial Protection Bureau. The bureau had moved to ban most types of mandatory arbitration clauses found in the fine print of agreements consumers often enter into when opening a checking account or getting a credit card.
The vote reflects the effort of the Trump administration and congressional Republicans to undo regulations that the GOP argues harm the free market. The measure now moves to President Donald Trump’s desk for his signature.
White House press secretary Sarah Huckabee Sanders said the president applauded the vote, saying the rule “would harm our community banks and credit unions by opening the door to frivolous lawsuits by special interest trial lawyers.”
Democratic lawmakers said the Consumer Financial Protection Bureau’s rule would have given consumers more leverage to stop companies from financial wrongdoing. They cited the sales practices at Wells Fargo and the security breach at credit company Equifax as examples of misdeeds protected through forced arbitration.
“So who does forced arbitration help? Wall Street banks and other huge corporations that never pay the price for cheating working people,” said Sen. Sherrod Brown, D-Ohio.
Richard Cordray, director of the consumer bureau, said: “Tonight’s vote is a giant setback for every consumer in this country. Wall Street won and ordinary people lost. This vote means the courtroom doors will remain closed for groups of people seeking justice and relief when they are wronged by a company.”
Republicans said the arbitration system has worked ”wonderfully” for consumers. They said the payouts for the average consumer in arbitration cases are generally much larger and come more quickly than when compared to the relief gained through class-action lawsuits.
Collins in a Wednesday statement called the rule “regulatory overreach that arose from a misguided attempt to help consumers,” saying that the cost of “inefficient” class-action suits “would likely have been borne by consumers in the form of increased fees and interest rates.”
Democrats argued that consumers generally don’t have the time and means to pursue claims in arbitration, and since most disputes revolve around small amounts, they typically just give up. They said banks and other financial firms know that in the end they won’t have pay a real price for taking advantage of a consumer.
King came out against the rule’s repeal in September, saying the Equifax breach showed “exactly why the CFPB implemented their new rule.” Democrats said class-action lawsuits would serve as a powerful tool for consumers.
“Once again, we’re helping the powerful against the powerless,” said Senate Minority Leader Chuck Schumer, D-New York, as the Senate neared the vote, sensing the Democrats would lose.
Two Republicans sided with Democratic lawmakers to keep the rule — Sens. Lindsey Graham of South Carolina and John Kennedy of Louisiana.
The advocacy group Consumers Union and several veterans groups, including the American Legion, lobbied to keep the rule. They said consumers would still have the option to use arbitration to resolve a dispute, if both parties want to go that route.
“Without the CFPB rule, consumers can be forced into a rigged system where they have no recourse. It’s a disgrace,” said Linda Lipsen, CEO of the American Association for Justice, an advocacy group that works to improve the legal system.
The American Bankers Association cheered the Senate vote, with Rob Nichols, the group’s president, saying “today’s vote puts consumers first rather than class-action lawyers.”
BDN writer Michael Shepherd contributed to this report.
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