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The Senate voted on Tuesday night to overturn a rule that would allow consumers to sue banks in large groups. The 51-50 vote, with the deciding one tie-breaking vote cast by Vice President Mike Pence, overturns a rule set by the Consumer Financial Protection Bureau. The vote is considered to be the most significant legislative victory for the financial industry so far in the Trump era.
The CFPB rule was announced in July and was expected to take effect in March 2018. In effect, the rule would have allowed consumers to file class-action lawsuits against large financial institutions instead of entering private arbitration. The House had already voted to overturn it in July. The Senate resolution will now head to the President’s desk, where he is expected to sign it into law.
The intent of the rule was to give consumers more power to hold powerful banks accountable for their wrongdoings, for example in the case of the Wells Fargo scandal in 2016 — the bank had opened customer accounts without their permission — and, more recently, of the Equifax leak with hackers grabbing the personal information of millions of consumers. With the overturning of this rule, millions of Americans who were affected by the Equifax breach may not be able to join class-action lawsuits against the company.
“Tonight’s vote is a giant setback for every consumer in this country,” said Richard Cordray, the current CFPB director. “Wall Street won and ordinary people lost. This vote means the courtroom doors will remain closed for groups of people seeking justice and relief when they are wronged by a company.”
However, bank lobbyists and those opposing the rule said that if it were to have passed, it would only result in a mass amount of class-action lawsuits. In turn, the cost of fighting them would trickle down and end up costing the consumer more. The financial industry sees this vote as a big win.
“The Senate acted to protect consumers with this vote,” said Richard Hunt, president and chief executive of the Consumer Bankers Association trade group. “This rule was ill-conceived, based on an incomplete study and did not fulfill the Bureaus’s goal of protecting consumers.”
Featured image by Jason E. Vines / Getty Images.
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