A Congressional denial of the CFPB’s restriction on arbitration agreements took another step forward late Tuesday night thanks to Vice President Mike Pence casting a tiebreaking vote in the Senate. With Republican Senators Lindsey Graham (S.C.) and John Kennedy (La.) voting with the Democrats, the Senate split 50-50, leaving it to Pence to break the tie on a resolution voiding the CFPB’s rule.
The original CFPB piece banned banks from preventing customers from joining class-action lawsuits with clauses within customer contracts. Bankers universally applauded voiding this clause, presuming President Donald Trump signs the resolution into law.
“ICBA thanks Congress for moving swiftly to preserve community banks’ contractual right to pursue fair and timely resolution through arbitration and avoid prohibitively expensive and protracted litigation,” ICBA President and CEO Cam Fine said in a statement. “Community banks’ livelihood depends on their fair and equitable treatment of customers. Arbitration is a well-established and tested process that offers better results for consumers and helps avoid frivolous class-action suits, which serve the interest of trial lawyers at the expense of community banks and consumers.”
“Today’s vote to overturn the CFPB’s arbitration rule is a win for consumers,” ABA President and CEO Rob Nichols said. “As we and others made clear in our multiple comments to the CFPB, the rule was always going to harm consumers and not help them. Today’s vote puts consumers first rather than class-action lawyers.
“A recent report from the U.S. Treasury found the arbitration rule would have imposed major costs on consumers and enriched trial lawyers while delivering little tangible relief. This followed a separate study from the OCC that found the rule could significantly increase the cost of credit for consumers.”
In light of some recent financial institution controversies, though, many outside the industry wanted the CFPB rule to stand and lamented the Senate’s action.
“This vote is a devastating blow to consumers,” said Michael Best, director of advocacy outreach at the Consumer Federation of America. “The Senate has taken away a critically important right, leaving consumers to fend for themselves when they are faced with crises in the financial services industry ranging from the Wells Fargo scandal to the Equifax scandal.”