US Senate repeals class action lawsuit rule


Vice President Mike Pence cast the tie-breaking vote to repeal a rule proposed by the Consumer Financial Protection Bureau (CFPB) that made it easier for Americans to sue their banks and credit card companies through class-action lawsuits.

Senators passed the measure by a vote of 51-50, handing Wall Street its first major win since President Donald Trump took office in January.

Two Republican senators, Lindsey Graham of South Carolina and John Kennedy of Louisiana, sided with Democrats in opposition to the resolution.

Wiping out the rule would affect tens of millions of Americans who often don’t know they are covered by an arbitration clause when they sign up for a credit card, checking account or prepaid card.

Many companies tuck arbitration clauses into contracts as a way to resolve disputes outside the court system, making it harder for an individual to bring a case against a bank or credit card company.

“Republicans have balked at plans by the consumer agency to bar companies from using arbitration clauses to stop consumers from bringing class-action suits.

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Tonight’s vote is a giant setback . . . Wall Street won and ordinary people lost.”

— Richard Cordray

for every consumer in this country,” Richard Cordray, Director of the CFPB, said in a statement. “Wall Street won and ordinary people lost.”

Senate banking committee Chairman Mike Crapo blamed the agency for failing to re-examine the rule and develop alternatives.

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The CFPB chose an all-or-nothing approach, leaving Congress no choice but to overturn it.”

— Mike Crapo

The White House lauded the move by senators as Congress standing up for everyday consumers. “The evidence is clear that the CFPB’s rule would neither protect consumers nor serve the public interest,” stated the White House. Instead, “consumers would have fewer options for quickly and efficiently resolving financial disputes.”

Republican lawmakers argue the CFPB’s own study shows consumers get more money in their pockets when they use arbitration as opposed to hiring expensive class-action trial lawyers.

Financial industry and business trade groups welcomed the latest step by Republican senators to eradicate the CFPB’s rule.

“Arbitration results in better and quicker outcomes for consumers,” said US Chamber of Commerce President and CEO Thomas Donohue in a statement.

Consumer advocates, however, said the vote was a tremendous setback for Americans, and that it offered companies like Wells Fargo and Equifax “a get-out-of-jail-free card.”

“This repeal will hurt millions of consumers across the country by denying them their rightful day in court when they get screwed over by financial predators,” Karl Frisch, executive director of Allied Progress, a consumer watchdog group, said in a statement.