WASHINGTON — The Republican-led Senate narrowly voted Tuesday to repeal a banking rule that would let consumers band together to sue their banks or credit card companies to resolve financial disputes.
Vice President Mike Pence cast the final vote to break a 50-50 tie.
The banking industry lobbied hard to roll back the regulation, which the Consumer Financial Protection Bureau unveiled in July. The rule would ban most types of mandatory arbitration clauses found in the fine print of agreements that consumers enter into when opening checking accounts or getting credit cards.
The vote reflects the effort of the Trump administration and congressional Republicans to undo regulations that the Republican Party argues harm the free market. The measure now moves to President Donald Trump's desk for his signature.
White House press secretary Sarah Huckabee Sanders said the president applauded the vote.
"The rule would harm our community banks and credit unions by opening the door to frivolous lawsuits by special interest trial lawyers," Sanders said.
Democratic lawmakers said the CFPB's rule would have given consumers more leverage to stop companies from financial wrongdoing. They cited the sales practices at Wells Fargo and the security breach at the credit company Equifax as examples of misdeeds that could be shielded through forced arbitration.
"So who does forced arbitration help? Wall Street banks and other huge corporations that never pay the price for cheating working people," said Sen. Sherrod Brown, D-Ohio.
Republicans said the arbitration system has worked "wonderfully" for consumers. They said the payouts for the average consumer in arbitration cases are generally much larger and come more quickly than when compared to the relief gained through class-action lawsuits.
"The effort to try to characterize this as some devious system that has been created to try to stop consumers from having access to fairness is simply false," said Sen. Mike Crapo, R-Idaho, chairman of the Banking, Housing and Urban Affairs Committee. "We have a very fair system that has been working for over 100 years in this country."
Crapo said that the average pay-out for consumers in class-action lawsuits against financial companies was just $32 but that lawyers stood to make millions.
Democrats argued that consumers generally don't have the time and means to pursue claims in arbitration and that because most disputes revolve around small amounts, they typically just give up. They said banks and other financial firms know that, in the end, they won't have pay a real price for taking advantage of a consumer.
"Once again, we're helping the powerful against the powerless," Senate Democratic leader Chuck Schumer of New York said as the Senate neared the vote.
Two Republicans sided with Democrats to keep the rule — Lindsey Graham of South Carolina and John Kennedy of Louisiana.