The Consumer Financial Protection Bureau’s anti-arbitration rule is now heading for a courtroom clash.

On Friday, the U.S. Chamber of Commerce, American Bankers Association, American Financial Services Association, Consumer Bankers Association, Financial Services Roundtable and a coalition of associations located throughout Texas filed a legal challenge to the CFPB’s rule that prohibits the use of class action waivers in arbitration clauses.

The lawsuit was filed in the Northern District of Texas, Dallas Division.

As outlined in the complaint, the organizations explained the legal challenge rests on several grounds, including that the rule violates the requirements of the Dodd-Frank Act because the CFPB study was flawed and based on biased data, and because the rule is harmful to consumers.

The five national association co-plaintiffs offered a joint statement.

“For years, our organizations have tried to work with the CFPB to promote strong consumer protection while maintaining a functional arbitration system,” they said. “The CFPB’s own study found that arbitration provides more benefits to consumers than class action lawsuits. Unfortunately, the CFPB chose to instead finalize a rule that will harm consumers and businesses by effectively banning arbitration and increasing speculative class action litigation.

“As Congress continues to consider action within its purview, we are filing this challenge to ensure all legal remedies are utilized to preserve arbitration for consumers,” they continued. “Ultimately, we hope this legal challenge will compel the CFPB to take this misguided rule back to the drawing board. If left unchecked, the CFPB’s rule will harm consumers and businesses alike while providing a financial windfall to the class action plaintiffs’ bar.”

In a message to SubPrime Auto Finance News, AFSA president and chief executive officer Chris Stinebert elaborated about this development.

“Such a broad showing of support from every corner of the consumer finance industry demonstrates how critically important today’s filing is,” Stinebert said. “The CFPB’s anti-arbitration rule would produce class action lawsuits that will take years to be heard, clog the courts, and result in comparatively small payouts for consumers.

“By contrast, disputes settled by arbitration result in quick decisions and pay-outs for consumers that average higher than class action settlements,” he continued.

The 422-page lawsuit that AFSA posted here arrived during the same week that the CFPB’s arbitration rule triggered some of the most emotional responses from dealers who attended the National Independent Automobile Dealers Association’s National Policy Conference.

NIADA pointed out that the CFPB’s study on arbitration found consumers receive on average more than $5,000 in arbitration hearings compared to roughly $32 in class-action litigation — if they receive anything at all.

“We are disappointed that the bureau has decided to adopt this ill-conceived rule,” NIADA chief executive officer Steve Jordan said when the bureau finalized the rule back in July. “(This) action shows the CFPB has decided to put the interests of class-action lawyers above those of the very consumers the bureau is mandated to protect.

“Arbitration has proven to be a faster, less expensive and more effective means of resolving consumer disputes than class-action lawsuits. And consumers who receive an award in arbitration almost always receive more than they would in a class-action lawsuit, a point proven by the CFPB’s own research,” Jordan continued.

“This rule will force small businesses to bear additional costs in defending class-action litigation, particularly meritless suits,” Jordan went on to say. “Those costs will ultimately be borne by consumers, and in the case of those who are credit-challenged, it could prove to be too much.”

At least one consumer organization's view of the lawsuit filing described a much different take on the development. Karl Frisch is executive director of Allied Progress, which says it's a consumer watchdog organization.

“Even Alanis Morissette couldn’t handle this much irony," Frisch said. "The idea that the Chamber and big banking interests would take the CFPB to court to stop consumers from going to court when they’re screwed over by big banks, reeks of desperate hypocrisy.

"The fact is that the Chamber is fighting to deny consumers the right to take financial institutions — like Equifax and Wells Fargo — to court for wrongdoing. They are dead wrong and they deserve to be called out," he went on to say.