The Senate narrowly laid to rest a Consumer Financial Protection Bureau (CFPB) rule late Tuesday evening that allowed consumers to band together to sue banks, financial institutions and credit card companies.
Vice President Mike Pence broke 50-50 tie Tuesday evening at 10:11 p.m., securing the first major deregulatory roll-back of President Donald Trump’s presidency.
The Senate’s vote makes it so that customers must agree to settle disputes directly with the bank or lending agency, and not through class-action lawsuits. This agreement is done through “arbitration clauses,” which are used in nearly every imaginable consumer good or service since 2011.
Supporters of the rule say it helps consumers fight banks, putting more power in the hands of customers to fight wrongs incurred from large financial institutions. Critics believe the rule simply helps fill the coffers of big law firms who like to drum up large lawsuits to make a payday.
“Wall Street won and ordinary people lost,” CFPB Director Richard Cordray said following the vote. “This vote means the courtroom doors will remain closed for groups of people seeking justice and relief when they are wronged by a company.”
Senate Majority Leader Mitch McConnell painted Tuesday night’s vote as a huge victory for consumers and free markets.
“The CFPB, which claims to protect consumers, seems to have found a way to actually harm them more. By eliminating a key settlement tool, consumers who are found to have been harmed by bad actors would receive less compensation under the CFPB’s regulation,” McConnell said in a statement. “The CFPB continues to be one of the most unaccountable bureaucracies in Washington and this Congress will continue to stand up for consumers even when the CFPB will not.”
Libertarian-leaning organizations, like the Competitive Enterprise Institute in Washington, also chalked the vote up as win.
“By voting down the Consumer Financial Protection Bureau’s anti-arbitration rule, the Senate today prevented a cash grab that would have transferred wealth from consumers to the pockets of wealthy attorneys,” Ted Frank, director of the Competitive Enterprise Institute’s Center for Class Action Fairness, said in a statement to The Daily Caller News Foundation.
“CEI’s attorneys have won over $100 million for class members fighting against class-action abuse, but far too few courts provide the protection for consumers that the law requires. Because of this, it is important for consumers to have the choice that the Senate helped protect today,” Frank said.
The CFPB, specifically Cordray, is already under the gun of House Republicans. A subcommittee of the House Financial Services Committee recommended in early August that Cordray be forced to step down after the CFPB refused to comply with an investigation into the CFPB’s rule making process.
The CFPB is also under the microscope of Trump’s deregulatory squad, which includes White House Office of Management and Budget Director Mick Mulvaney and Treasury Secretary Steve Mnuchin.
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