Republicans, Wall Street score victory in
dismantling class-action rule
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[October 25, 2017]
By Lisa Lambert
WASHINGTON (Reuters) - Banks, credit card
issuers and other financial companies will be able to block customers
from banding together to sue over disputes, after the U.S. Senate on
Tuesday narrowly killed a rule banning the firms from using "forced
arbitration" clauses.
Republican Vice President Mike Pence appeared on the Senate floor at
10:11 p.m. EDT (0211 GMT) to cast the tie-breaking vote as the chamber's
president and approve the most significant roll-back of Obama-era
financial policy since President Donald Trump took office vowing to
loosen the leash on Wall Street. The final count was 51 to 50.
The Republican-dominated House of Representatives has already passed the
resolution repealing the Consumer Financial Protection Bureau (CFPB)
rule released in July. The resolution also bars regulators from
instituting a similar ban in the future.
After a signature from Trump, expected soon, the resolution will
abruptly end a years-long fight that has included multiple federal
regulators, consumer advocacy groups, and financial lobbyists.
CFPB Director Richard Cordray, a Democrat appointed by former President
Barack Obama, rarely comments on congressional action but on Tuesday
night said "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,"
he added.
Customers must agree to the clauses as a condition of opening accounts,
saying they will take any disputes to closed-door arbitration instead of
joining class-action lawsuits, where complainants band together to share
litigation costs. The clauses are used for nearly every U.S. consumer
product and service since the Supreme Court ruled them legal in 2011.
Victims of the Equifax Inc. <EFX.N> hack were outraged last month when
the company included forced arbitration fine print in offering them free
credit monitoring. The company later removed the clauses.
At the same time, Wells Fargo & Co <WFC.N> customers whose identities
were used in last year's phony accounts scandal have had difficulty
suing the bank because they are bound by arbitration clauses in
contracts they signed for legitimate accounts. The CFPB rule, set to go
into effect next spring, was not retroactive and would not have helped
Equifax or Wells customers.
Members of Trump's administration have relentlessly assailed the
regulation, and on Monday the Treasury Department laid out arguments
against it in a special report.
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The U.S. Capitol building is seen at sunset in Washington, U.S. May
17, 2017. REUTERS/Zach Gibson

Acting Comptroller of the Currency Keith Norieka said on Tuesday the
Senate's action stopped a rule "that would have likely increased the
cost of credit for hardworking Americans and made it more difficult
for small community banks to resolve differences with their
customers."
Meanwhile, major bank lobbying groups who sued last month to block
the rule cheered the resolution's passage.
One of the groups, the U.S. Chamber of Commerce, said congress had
reined in the "overgrown and unaccountable" CFPB, an independent
agency created to protect individuals' finances that conservatives
say consistently reaches beyond its authority in its rulemaking.
Critics of the rule had said class actions only benefit trial
lawyers and arbitration generally wins larger settlement awards for
customers. Supporters said forced arbitration harms customers by
putting companies in control of the process and taking away the
right to sue enshrined in the U.S. Constitution.
The CFPB created its rule after conducting a five-year study that
found customers struggle to have banks open arbitration cases about
their complaints, but that those few cases have led to slightly
higher individual awards than class actions.
"The Senate today prevented a cash grab that would have transferred
wealth from consumers to the pockets of wealthy attorneys," said Ted
Frank, director of the center for class-action fairness at the
free-market group Competitive Enterprise Institute.
Ohio Senator Sherrod Brown, the most senior Democrat on the Banking
Committee, meanwhile, said Tuesday's vote "will make the rich
richer, and the powerful more powerful."
(Reporting by Lisa Lambert; Editing by Paul Tait and Muralikumar
Anantharaman)
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