The Consumer Financial Protection Bureau is proposing giving customers the ability to file class action lawsuits against banks and other financial firms—a move financial industry associations are describing as a gift to lawyers.

A proposed CFPB rule would limit banks from binding customers to arbitration to resolve disputes, ABC News reported. Such arbitration is usually spelled out in the terms of agreement many banks make customers sign before doing business with them.

Congress already prohibits arbitration agreements in the residential mortgage market. The rule change would expand that ban to many core functions of banking, including credit cards and student loans, according to ABC News. http://abcn.ws/1QU19Qi

Business groups representing the banking industry were quick to blast the new rule. Richard Hunt, CEO of the Consumer Bankers Association, said arbitration "has long provided a faster, better, and more cost-effective means of addressing consumer disputes than litigation or class action lawsuits."

"The real winners of today's proposal are trial attorneys, not consumers," he said.

Rob Nichols, CEO of the American Bankers Association, said the new rule would do little more than create "a flood of attorney-driven class action suits from which consumers receive virtually nothing."

Credit unions also would be affected by the new rule. Alexander Monterrubio, director of regulatory affairs for the National Association of Federal Credit Unions, urged the bureau "to avoid promulgating any rule that unreasonably limits the availability of arbitration or creates burdensome reporting requirements that negatively affect credit unions."

The American Association for Justice—the professional group representing many trial lawyers—had a very different take on the rule. AAJ President Larry Tawwater said the change restores the average American's ability to hold Wall Street accountable for its actions.

"The financial security of American families depends on a level playing field where they can hold Wall Street accountable if they are cheated out of their hard-earned money," he said. "But forced arbitration gives big corporations a license to steal by preventing cheated customers from banding together as a class to hold that corporation accountable."

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