Senate Republicans have decided consumers should not have the right to file class-action lawsuits against banks even when they have a good case. Even then, however, the vote was close.
The Financial industry had lobbied Congress to repeal the rule.
Following the vote, Noreika praised the Senate's decision as a "victory for consumers and small banks across the country".
The vote was 50/50, with the tie-breaking aye cast by Vice President Pence.
"The CFPB's own study said the clear majority of arbitration clauses. specifically recognize and allow access to small claims court as an alternative to arbitration", he said.
Only two Republicans-Lindsey Graham of SC and John Kennedy of Louisiana-voted to keep the rule in place.
The Republican-dominated House of Representatives has already passed the resolution repealing the Consumer Financial Protection Bureau (CFPB) rule released in July, which also bars regulators from instituting a similar ban in the future. Class-action lawsuits, rather, can benefit consumers by forcing a company to change its broader pattern of behavior. That followed another agency, the Office of the Comptroller of the Currency, which also claimed that the rule would raise legal costs for banks.
"The bank will generally underwrite the cost of the arbitration and it's an informal, fast proceeding where you can actually win within a short amount of time", he says.
The CFPB rule was to be introduced next Spring but would not have helped customers affected by the Equifax data leak or the sales practices scandal at Wells Fargo, where staff created as many as 1.5m deposit accounts and 565,000 credit card accounts without customers' consent. "No one", said Sen.
Members of Trump's administration have relentlessly assailed the regulation, and Acting Comptroller of the Currency Keith Norieka said on Tuesday the Senate's action stopped a rule "that would have likely increased the cost of credit for hardworking Americans and made it more hard for small community banks to resolve differences with their customers". Elizabeth Warren defended the rule this week.
Cordray and consumer advocates counter that the risk of paying out hundreds of millions of dollars in legal damages will incentivize banks to change their bad behavior.
Based on the Senate's action, financial institutions can put down their pens if they had begun excising mandatory arbitration provisions from agreements or pick up their pens if they had been refraining from adding such provisions in light of the proposed rule.
Circling back to our coverage from several weeks ago, at issue is something known as arbitration clauses, which are pretty straightforward: in the finance industry, corporate powerhouses want to make it vastly more hard for consumers to sue them. Sherrod Brown, D-Ohio, on the Senate floor during debate. Equifax's reputation has been damaged by a data breach that resulted in the theft of personal data on almost half the US population, while Wells Fargo was fined by regulators for opening millions of accounts without customers' approval.
"If there's no forced arbitration clause in your contract, you have a choice. Only a couple months ago did authorities learn that Wells Fargo created two-thirds more fake accounts than it initially acknowledged.
You know who does trust the banks, though?
Ian McKendry is the Congress reporter for American Banker.