Senate votes to repeal consumer banking rule

Richard Cordray the head of the Consumer Financial Protection Bureau backs a rule that would block mandatory clauses that require consumers to settle disputes they have with credit card companies or banks through arbitration

To overturn it, Senate Republicans used an obscure legislative process called the Congressional Review Act which allows lawmakers to overturn a recently finalized rule by a majority vote.

With only two Republicans voting no - Sens.

Why risk bipartisan consumer ire to support big banks? The Hill reports that Republican Senators Lindsey Graham (S.C.) and John Kennedy (La.) voted with Democrats to keep the rule in place, but it was not enough.

"The rule targeted clauses that have been inserted into hundreds of thousands of contracts - covering products ranging from credit cards to payday loans - that require customers to waive the ability to sue companies in class action lawsuits", writes Barney Jopson for Financial Times.

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"As long as the market continues on the upward swing, nobody wants to rock the boat", says Seth Kaplowitz, a lecturer in finance at San Diego State University. "Banks, credit unions, and other companies file class action lawsuits to pursue justice when they are harmed as a group, and our rule restores consumers' right to do the same".

Will it impact class-action suits against Wells Fargo?

Industry officials praised the vote. The rule allows consumers to avoid being forced into arbitration if they have a dispute with a company. "Today's vote puts consumers first rather than class-action lawyers".

Proponents of the action hailed it as a win against trial lawyers, a victory for community banks and a benefit to consumers who won't pin their hopes on class-action lawsuits that typically could bring winners less than $33 apiece.

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For one thing, consumers have little incentive to use arbitration for disputes over small amounts, since it costs them $200 or more to have a hearing.

And of one third of cases that actually went to an arbitrator in 2010 and 2011, only about 1 in 5 consumers won, getting a total of just over $360,000 in reimbursements or debt forgiveness in those 341 cases, the study found. Supporters say that possibility would help ensure banks, credit card companies and other lenders treat consumers appropriately. According to Mr. Francis, "c$3 young woman actions are uniquely suited to helping our military". From 2008 to 2012, 350 million claimants won 419 settlements that averaged $540 million a year. As the CFPB said when it created the rule, it was designed to preventing companies from "sidestep [ing] the court system" by "forcing consumers to give up or go it alone".

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.

"If there's no forced arbitration clause in your contract, you have a choice". The 800 respondents were all identified as likely voters. The legislation required the CFPB to study the use of arbitration agreements and report back to Congress.

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The data set was too small to guarantee that there was no extra cost, according to Alexei Alexandrov, a former senior economist at the CFPB who wrote the analysis. "So consumers in many instances have signed away their right to seek restitution through a class action".

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