Late Tuesday night, the Senate voted to make it impossible for consumers to come together to bring a lawsuit against credit card companies, auto lenders, credit reporting companies, and other financial firms.
Overriding an old rule created by the Consumer Financial Protection Bureau (CDPB) this new ruling essentially gives these financial institutions immunity from lawsuits.
The vote, which was a 50-50 tie in the Senate, was broken by Vice President Mike Pence and approved by the House. President Trump is expected to sign it as soon as possible.
The original rule, created by the CFPB, prevented financial firms from using “forced arbitration” agreements, in which a company refuses to do business with any consumer that will not sign away their right to sue the company in real court. Instead, consumers that sign away this right must resolve any disputes through privatized arbitration – a process that greatly favors corporate parties.
The CFPB rule also prohibited financial firms from requiring consumers to sign away their right to bring class action lawsuits. Now consumers can longer fight back against corporations that charge illegal fees.
Every Democratic Senator, and two Republican Senators, Lindsey Graham (R-SC) and John Kennedy (R-LA) voted to uphold the rule. Every other Republican Senator voted to reverse it.
The banking industry has been lobbying hard for this reversal and this will be a huge win for them. Rob Nichols, president of The American Bankers Association, said, “Today’s vote puts consumers first rather than class-action lawyers.”
Democrats said the rule was needed to give consumers leverage to stop companies from taking advantage of them financially. They used the most recent examples of the sales practices at Wells Fargo and the security breach at Equifax, both of which were protected through forced arbitration.
Republicans on the other hand insist that “forced arbitration” has worked “wonderfully” for consumers. Senator Mark Crapo, Republican chairman of the Senate Banking, Houseing and Urban Affairs Committee said, “The effort to try to characterize this as some devious system that has been created to try to stop consumers from having access to fairness is simply false. We have a very fair system that has been working for over 100 years in this country.”
As Democratic Senate Minority Leader Chuck Schumer stated, “Once again, we’re helping the powerful against the powerless.”