WASHINGTON (Reuters) – Bank lobby groups launched a fresh attack on Friday on a new U.S. rule that restores customers’ ability to band together to sue financial companies, filing a legal challenge in Texas that said the rule was based on flawed data and could harm consumers.
The five powerful groups, which include the U.S. Chamber of Commerce and the American Bankers Association, filed the action in the Northern District of Texas “to ensure all legal remedies are utilized to preserve arbitration for consumers,” according to a joint statement.
A top banking regulator, Republican political leaders and private companies have relentlessly assailed the rule abolishing “mandatory arbitration clauses” from bank and credit-card contracts since the Consumer Financial Protection Bureau released it in July. It takes effect next spring.
Customers must agree to the clauses as a condition of opening accounts, saying they will take any disputes to closed-door arbitration instead of joining class-action lawsuits, where complainants band together to share litigation costs.
Critics of the rule say class actions only benefit trial lawyers and arbitration generally wins larger settlement awards for customers. Supporters say forced arbitration harms customers as it puts companies in control of the process and takes away the right to sue enshrined in the U.S. Constitution.
“Unfortunately, the CFPB chose to…finalize a rule that will harm consumers and businesses by effectively banning arbitration and increasing speculative class action litigation,” the bank groups said in their filing.
The new rule would still allow optional arbitration, but companies say they cannot afford both an arbitration system and multi-year trials.
The Texas court is considered favorable to rolling back federal regulation, although in February it upheld an Obama-era rule on retirement advice.
Other attacks on the arbitration rule have wobbled. Acting Comptroller of the Currency Keith Noreika…