The U.S. Senate voted last month to overturn a Consumer Financial Protection Bureau (CFPB) rule that would have prohibited class action bans in arbitration clauses. The Senate voted 51-50 to nullify the CFPB’s arbitration rule, with Vice President Mike Pence breaking a 50-50 tie. All but two Republicans voted in favor of the disapproval resolution, with Sens. Lindsey Graham of South Carolina and John Kennedy of Louisiana and all 48 Democrats voting against it.
The vote came after the U.S. House of Representatives voted in July to eliminate the CFPB’s rule under the Congressional Review Act (CRA), a 1996 law that allows Congress to overturn recently finalized regulations with simple majority votes in both houses. President Donald Trump is expected to sign the resolution. He has put his full support behind this anti-consumer measure. CFPB Director Richard Cordray called the vote a “giant setback” for consumers that preserves a “two-tier” system of justice where consumers are shut out of court. Cordray said in a statement:
It robs consumers of their most effective legal tool against corporate wrongdoing. As a result, companies like Wells Fargo and Equifax remain free to break the law without fear of legal blowback from their customers.
The CFPB rule, released in July, would have barred companies from putting class action bans in their arbitration agreements, allowing consumers to sign on to class action litigation against banks, credit card companies, payday lenders and other companies that have used such bans in the past. The CRA also says regulators cannot issue rules that are substantially similar to ones that have been disapproved by Congress, making it impossible for the CFPB to come forward with a rule that takes the same tack in any future effort to rein in arbitration clauses. Sen. Sherrod Brown, D-Ohio, said in a statement:
Forced arbitration takes power away from ordinary people and gives it to big banks and Wall Street companies that already have an unfair advantage.
The rule had been opposed by the financial services industry. It would be interesting to see how much lobbyists for the affected industries have given in campaign donations to members of Congress. The power of the banks, credit card companies and payday lenders is beyond description. Ordinary citizens badly need friends in Washington who will protect their interests.
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