Senate GOP moves to repeal consumer rule
Washington — The Republican-led Senate narrowly voted Tuesday to repeal a banking rule that would let consumers band together to sue their bank or credit card company to resolve financial disputes.
Vice President Mike Pence cast the final vote to break a 50-50 tie. The banking industry had been lobbying hard to roll back the regulation from the Consumer Financial Protection Bureau. The bureau had moved to ban most types of mandatory arbitration clauses found in the fine print of agreements consumers often enter into when opening a checking account or getting a credit card.
The vote reflects the effort of the Trump administration and congressional Republicans to undo regulations that the GOP argues harms the free market. The measure now moves to President Donald Trump’s desk for his signature.
Democratic lawmakers said the rule was needed and would give consumers more leverage to stop companies from financial wrongdoing. They cited the sales practices at Wells Fargo and the security breach at credit company Equifax as examples of misdeeds protected through forced arbitration.
“So who does forced arbitration help? Wall Street banks and other huge corporations that never pay the price for cheating working people,” said Sen. Sherrod Brown, D-Ohio.
Republicans said that the arbitration system has worked “wonderfully” for consumers. They said the payouts for the average consumer in arbitration cases are generally much larger and occur much more quickly than compared to the relief gained through class-action lawsuits.
“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,” said Sen. Mike Crapo, the Republican chairman of the Senate Banking, Housing and Urban Affairs Committee. “We have a very fair system that has been working for over 100 years in this country.”
Crapo said the average pay-out for consumers in class-action lawsuits against financial companies was just $32, but lawyers stood to make millions.
“This is a rule to benefit the plaintiff’s bar,” Crapo said.
Democrats argued that consumers generally don’t have the time and means to pursue claims in arbitration, and since most disputes revolve around small amounts, they typically just give up. They said banks and other financial firms know that, in the end, they won’t have pay a real price for taking advantage of a consumer. Class-actions would serve as a powerful tool for consumers, they said.
“Once again, we’re helping the powerful against the powerless,” said Senate Minority Leader Chuck Schumer, D-N.Y., as the Senate neared the vote.
Two Republicans sided with Democratic lawmakers to keep the rule — Sens. Lindsey Graham of South Carolina and John Kennedy of Louisiana.
The advocacy group Consumers Union and several veterans groups, including the American Legion, lobbied to keep the rule. They said consumers would still have the option to use arbitration to resolve a dispute, if both parties want to go that route.
“Giving the consumer a genuine choice also means the lender has the incentive to make sure the alternative is fair and workable, so that informed consumers will have a reason to choose it,” said George Glover, senior policy counsel for Consumers Union.
The American Bankers Association applauded the Senate vote. “Today’s vote puts consumers first rather than class-action lawyers,” said Rob Nichols, the group’s president and chief executive officer.