On October 24, 2017, Vice President Mike Pence cast a tie-breaking vote in the Senate to repeal the Consumer Financial Protection Bureau’s arbitration rule. The rule prohibited covered providers of financial products and services from banning participation in a consumer class action as part of a pre-dispute arbitration clause. The rule was issued after a 2015 study showed that pre-dispute arbitration agreements prevent consumers from seeking relief when financial service providers violate the law.
All Democrats and just two Republicans—Lindsay Graham (S.C.) and John Kennedy (La.)—voted against repeal. The House voted in July to repeal the rule with all Democrats and only one Republican, Walter Jones (N.C.), opposing. President Donald Trump has signed the bill into law.
One day before the Senate vote, the Treasury Department issued a report harshly criticizing the CFPB’s justifications for the rule. Treasury argued, among other things, that consumer class actions impose extraordinary costs on businesses while providing little relief to consumers. Treasury warned that the rule would “effect a large wealth transfer to plaintiffs’ attorneys” while encouraging meritless litigation. In lieu of banning class action participation, Treasury suggested that simply requiring more prominent disclosures would better protect consumers.
CFPB Director Richard Cordray said in a statement that the vote was “a giant setback for every consumer in this country,” noting that “Wall Street won and ordinary people lost.”
– Kelly Harpster