John Adams was the first Vice President to break a tie in US Senate voting back in 1789, and it has only happened 258 times since. Yesterday, Mike Pence made it number 259 as he broke a 50/50 tie regarding the forced arbitration rule, a significant risk to the credit card industry.
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
There’s good news and bad news here. Blocking class actions is an indication that CFPB is weakening as the Trump administration begins to take stride in Washington. CFPB unearthed many deceptive sales practices in the card industry, illustrating how more than 100 million cardholders oversubscribed to credit card “revenue enhancement” products. CFPB has also done much to bring financial literacy to the forefront of household budgeting, though.
The ruling clearly favors the credit card business.
Critics of the rule say class actions only benefit trial lawyers and arbitration generally wins larger settlement awards for customers. Supporters say 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.
Class actions enrich lawyers while “consumers get pennies on the dollar”, said Senator John Cornyn, Republican from Texas.
The big item to watch, though is Mr. Cordray himself. His term expires in July 2018, but with an anticipated run for the Governership of Ohio, the shift may occur earlier.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
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