This arbitration rule, which the Consumer Financial Protection Bureau developed, was created to protect consumers - and its overturn means consumers have less agency when it comes to holding companies accountable for their actions.
Meanwhile, although consumers should read agreements with banks carefully for a possible opt-out option from mandatory arbitration, there's a good chance they won't find it.
Elizabeth Warren (D-Mass), a driving force behind the creation of the CFPB, said the action will "make it easier for financial institutions to cheat people".
The Trump administration has come out against a set of new regulations that would allow consumers to band together to sue their bank or credit card company.
The Senate vote followed earlier House approval and now goes to President Trump for expected signing.
The Senate vote was "a giant setback for every consumer in this country", said the CFPB's Director Richard Cordray. Both companies, in the face of corporate scandals, used arbitration clauses to try to quash legal challenges from customers.
Why are class-action suits important?
Those who opposed the rule, including a group of Republican senators led by Mike Crapo, a senator from Idaho who is the chairman of the U.S. Senate Committee on Banking, Housing and Urban Affairs, said the CFPB is too powerful. "I urge my colleagues to repeal the CFPB arbitration rules that imposes obvious costs and invisible benefits".
"As we and others have made clear, the rule was always going to harm consumers and not help them", said Rob Nichols, president and CEO of the American Bankers Association, in a statement.
But Elizabeth Warren, a Democrat from MA who is a proponent of the CFPB, has said the rule would have allowed "working families to hold big banks accountable when they're cheated".
Consumer advocates also often cite the controversy around Wells Fargo opening bank accounts in customers' names as an argument in favor of a forced arbitration rule.
The example of Wells Fargo, the large national bank caught defrauding customers by signing up them for fee-based accounts and auto insurance they never wanted, brought the issue into the limelight. Lisa Murkowski, R-Ala., was the final lawmaker to vote, with several minutes ticking by as the Senate awaited her decision. Without it, the millions affected by the historic security breach may be disallowed from related joining class action lawsuits. A 2016 Pew survey found even higher support - 89 percent - for class-action lawsuits against banks. Affected businesses will spend an estimated $500 million in extra legal fees, $330 million in payments to plaintiffs' lawyers, and $1.7 billion in additional money for settlements, the Treasury reports. Since 2007, creditors have been prohibited by the MLA from including arbitration agreements in contracts for consumer credit extended to active-duty service members and their dependents where the credit is a closed-end payday loan with a term of 91 days or less in which the amount financed does not exceed $2,000, a closed-end vehicle title loan with a term of 181 days or less, or a closed-end tax refund anticipation loan.