U.S. Senate ends class-action suits against finance firms

WASHINGTON DC, USA – The US Senate voted Tuesday, October 24, to kill a banking rule that allows class-action suits against banks or credit card companies, in a victory for President Donald Trump that further loosens regulation of Wall Street.

Vice President Mike Pence cast the tie-breaking vote to overturn by a margin of 51-50 the Consumer Finance Protection Bureau (CFPB) rule intended to address fine-print clauses that bank and credit card consumers must agree to which bar them from seeking redress through class-action litigation. 

The measure has been championed by Richard Cordray, the director of the CFPB, as a way to ensure that wronged consumers have their day in court.

But a Treasury Department report on Monday, October 23, attacked the rule, questioning whether it would “serve either consumer protection or the public interest.” 

Rather, it argued that by eliminating mandatory arbitration, the CFPB will generate more than 3,000 additional class action lawsuits, requiring hundreds of millions in lawyers’ fees and $1.7 billion in additional settlements.

The Treasury report drew strong criticism from the advocacy group Public Citizen, which accused the department of siding “with Equifax and Wells Fargo against ripped-off customers.”

The White House issued a statement applauding Congress, which it said “is standing up for everyday consumers and community banks and credit unions, instead of the trial lawyers, who would have benefited the most from the CFPB’s uninformed and ineffective policy.”

But the vote was criticized by many Democrats, including Senator Elizabeth Warren, known for her work advocating consumer rights.

“Tonight @VP Pence & the @SenateGOP gave a giant wet kiss to Wall Street. No wonder Americans think the system is rigged against them. It is,” she tweeted.

Trump has made rolling back banking regulations a key priority, and Tuesday’s vote also marked a legislative win for his Republican party that has been roiled by infighting.

Senate Republicans put their differences aside, with Jeff Flake, John McCain and Bob Corker – who have all voiced concerns about the president’s coarse and combative style of governing – all voting against the rule.

The CFPB, an agency created under the 2010 Dodd-Frank Wall Street reform legislation in the wake of a meltdown of the US mortgage market, is itself in the Trump administration’s crosshairs.

A Treasury report in June said the bureau required “significant restructuring,” while also calling for “stress tests” for large banks to be eased as the administration seeks to broadly revise the Dodd-Frank law. – Rappler.com