Senate vote spares banks from class action lawsuits

Senate Republicans voted 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.

The overturning of the rule, with Vice President Mike Pence breaking a 50-50 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. 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 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.

For 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 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. Arbitration clauses have derailed claims of financial gouging, discrimination in car sales and unfair fees.

The measure now heads to President Trump, who is expected to sign it.

“Tonight’s vote is a giant setback for every consumer in this country,” Richard Cordray, the director of the consumer bureau, said in a statement. “As a result, companies like Wells Fargo and Equifax remain free to break the law without fear of legal blowback from their customers.”