Jessica Fino 26 Oct 2017 10:09am

US Senate votes to protect banks against class-action suits

US Senate has voted to roll back a rule that made it easier for people to sue banks through class-action lawsuits

The Senate voted 51-50, with vice-president Mike Pence casting the deciding vote as a tiebreaker, to reverse the Consumer Financial Protection Bureau (CFPB) rules barring banks and other financial institutions from using “forced arbitration” clauses in contracts between consumers and banks.

The White House said in a statement that the CFPB's rule would “harm our community banks and credit unions by opening the door to frivolous lawsuits by special interest trial lawyers”.

The statement continued, “By repealing this rule, Congress is standing up for everyday consumers and community banks and credit unions, instead of the trial lawyers, who would have benefited the most from the CFPB's uninformed and ineffective policy.”

Pence said he was proud to cast the tie-breaking vote to “stand up for everyday consumers and community banks”.

However, senator Elizabeth Warren said on Twitter the vote was a “giant wet kiss to Wall Street”.

“No wonder Americans think the system is rigged against them. It is.”

Meanwhile, the US Chamber of Commerce welcomed Tuesday’s vote, saying the Senate made “the right call”.

Thomas J. Donohue, the chamber’s president and CEO said, “Arbitration results in better and quicker outcomes for consumers, so we applaud both houses of Congress for taking action to pull back a rule that would have benefited the class action trial bar at the expense of American consumers and businesses alike.”

Richard Cordray, director of the CFPB, said the vote was a giant setback for every consumer in the country and meant courtroom doors would be closed to people seeking justice when they were wronged by a company.