Ruling by US watchdog deals big blow to banks

New York

The US consumer watchdog adopted a rule on Monday that would pry open the courtroom doors for millions of Americans by prohibiting financial firms from forcing them into arbitration in disputes over their bank and credit card accounts.

The action, by the Consumer Financial Protection Bureau, would deal a serious blow to banks and other financial firms, freeing consumers to band together in class-action lawsuits that could cost the institutions billions of dollars.

"A cherished tenet of our justice system is that no one, no matter how big or how powerful, should escape accountability if they break the law," Richard Cordray, director of the consumer agency, said in a statement.

The new rule, which could take effect next year, is almost certain to set off a political firestorm in Washington. Both the administration of President Donald Trump and House Republicans have pushed to rein in the consumer finance agency as part of a broader effort to lighten regulation on the financial…