Senate Republicans, with Vice President Mike Pence breaking a 50-to-50 tie, voted Tuesday to strike down a new consumer protection rule. Five years in the making, it allowed millions of Americans to file class-action lawsuits against financial institutions.
The defeat of the rule further loosens regulation of Wall Street. It is yet another step by the Trump administration and Republicans to roll back Obama-era policies. Policies enacted in response to the 2008 economic crisis caused by prior Republican led deregulation of Wall Street.
By overturning the rule, Republicans dismantled a major effort of the Consumer Financial Protection Bureau (CFPB) under Obama appointee Richard Cordray. Congress created CFPB after deceptive or careless lending practices in mortgages led to the bailout of several major financial institutions. The Director of the CFPB is appointed by the sitting president, but serves a five year term independent of Executive branch changes.
The Consumer Financial Protection Bureau has broad authority and autonomy from the White House and Congress. CFPB enforces existing federal laws and writes new regulations, like the arbitration rule. That independence has rankled Republicans and other federal agencies.
The new rule written by the consumer bureau, set to take effect in 2019, restored the right of individuals to sue in court. Credit card companies and banks insert arbitration clauses into the fine print of financial contracts to bar people from pooling their resources in class-action lawsuits. Part of a spate of actions by the bureau, CFPB also cracked down on debt collectors, the student loan industry and payday lenders.
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