Senate Republicans vote to eliminate rule allowing consumers to sue financial institutions.

Senate Republicans Vote to Eliminate Rule That Would Allow Consumers to Sue Financial Institutions

Senate Republicans Vote to Eliminate Rule That Would Allow Consumers to Sue Financial Institutions

The Slatest
Your News Companion
Oct. 24 2017 11:13 PM

Senate Republicans Vote to Eliminate Rule That Would Allow Consumers to Sue Financial Institutions

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The Wall Street Bull sculpture is seen in the Financial District on December 8, 2016 in New York.

BRYAN R. SMITH/AFP/Getty Images

Vice President Mike Pence cast the deciding vote Tuesday night, breaking a 50-50 tie in the Senate, to defeat a new rule that would have ensured consumers had the right to sue financial institutions, rather than being compelled to accept arbitration to combat wrongdoing. The rule was drafted by the Consumer Financial Protection Bureau, which was created following the financial crisis in an effort to provide more oversight and consumer protections. Banks and credit card companies were vehemently against the rule, which was set to get into effect in 2019, because it would open them up to increased liability after years of relying on small-type arbitration clauses in their consumer contracts, where customers preemptively forgo their right to sue the company.

Republicans opposed the Obama-era legislation as did the Trump administration, which cast the consumer protection as an unnecessary, costly burden on business and a drag on the economy. Democrats, who generally backed the bill, cited the recent cases of Wells Fargo and Equifax, where gigantic financial institutions deceived customers, but were able to protect themselves financially from consumers with preexisting arbitration clauses.

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“Today, it is hard to open up a checking account, rent a car, get cable service or check a loved one into a nursing home without agreeing to mandatory arbitration,” the New York Times notes. “The [CFPB] found that once blocked from suing, few people went to arbitration at all. And the results for those who did were dismal. During the two-year period studied, only 78 arbitration claims resulted in judgments in favor of consumers, who got $400,000 in total relief.”