The rule, Democrats argued, was precisely what was needed to protect the rights of vulnerable borrowers. Both companies, in the face of corporate scandals, used arbitration clauses to try to quash legal challenges from customers. Looking to head off a repeal, Democrats and consumer advocates branded the effort as a gift to financial institutions like Wells Fargo and Equifax. Arbitration clauses have derailed claims of financial gouging, discrimination in car sales and unfair fees. By forcing people into private arbitration, the clauses effectively take away one of the few tools that individuals have to fight predatory and deceptive business practices. The rule, five years in the making, would have dealt a serious blow to financial firms, potentially exposing them to a flood of costly lawsuits over questionable business practices.įor decades, credit card companies and banks have inserted arbitration clauses into the fine print of financial contracts to circumvent the courts and bar people from pooling their resources in class-action lawsuits. By defeating the rule, Republicans are dismantling a major effort of the Consumer Financial Protection Bureau, the watchdog created by Congress in the aftermath of the mortgage mess. The overturning of the rule, with Vice President Mike Pence breaking a 50-to-50 tie, will further loosen regulation of Wall Street as the Trump administration and Republicans move to roll back Obama-era policies enacted in the wake of the 2008 economic crisis. Senate Republicans voted on Tuesday to strike down a sweeping new rule that would have allowed millions of Americans to band together in class-action lawsuits against financial institutions.
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