A new proposal by the nation’s chief consumer watchdog could help government regulators and prosecutors stop big banks’ dubious practices more quickly.

The Consumer Financial Protection Bureau on Thursday suggested a ban on clauses tucked into contracts for credit cards, student loans and other financial products that prohibit consumers from joining together to sue financial companies for wrongdoing.

The proposal doesn’t cover existing contracts between consumers and financial companies — only new agreements. But consumers could reap the benefits of the rule by taking out new loans to pay off debts covered by existing class-action bans.

Intent on avoiding class-action lawsuits, financial companies for years have insisted on forcing aggrieved consumers into private and often secretive arbitration proceedings. Consumer advocates say these result in little compensation for wronged consumers and allow companies to keep the cost of wrongdoing low.

Settling disputes in arbitration proceedings often leads to no change in dubious business practices, either. That’s because records are typically shielded from public view, letting wrongdoers continue to settle cases with harmed consumers without tipping off state and federal authorities to what could be systemic or deliberate misbehavior.

The rise of mandatory arbitration clauses — or “gotchas,” as the CFPB has called them — has allowed companies to “sidestep the legal system, avoid accountability, and continue to pursue profitable practices that may violate the law and harm countless consumers,” the watchdog said in a statement.

But aggrieved consumers would be able to have their day in court under the new proposal, meaning regulators and others could mine court records to root out anti-consumer practices.

That’s important because “it has been long understood that law enforcement resources are limited and need to be supplemented by a consumer’s right to pursue relief on his or her own behalf,” North Carolina Attorney General Roy Cooper said in a 2014 letter to the consumer bureau.

A group of consumer advocates told the federal consumer watchdog that year that “government regulators lack the resources to pursue the vast majority of cases brought to them.”

With many Republicans set on shrinking the size of government at the local and national levels and depriving agencies of funds needed to carry out their responsibilities, the proposed rule could be a boon to regulators that are charged with overseeing wide swaths of the consumer finance market despite having few resources, experts said.

One big reason for this is that class-action lawsuits can give consumers access to internal company records that detail how and why they were harmed by their financial services provider, according to Lauren Saunders, who directs the National Consumer Law Center’s federal legislative and regulatory efforts. 

Consumers don’t have a similar level of access to internal company documents through arbitration, she said.

“You know you were screwed, but you don’t know how they did it,” Saunders said of aggrieved consumers fighting financial companies. “Thanks to discovery, you can find evidence — the smoking gun — and use that to convince regulators to take action.”

Michael Barr, a former assistant secretary for financial institutions at the Treasury Department, said on Twitter that he supports the CFPB’s proposal in part because “too many financial abuses are going unchecked.”

Class-action lawsuits help deter wrongdoing, the consumer bureau said in a comprehensive report to Congress last year.

In fact, according to the bureau, in cases where government regulators and class-action attorneys targeted the same misbehavior, the class-action lawsuits were filed before the government took action around two-thirds of the time.

The Class Action Fairness Act requires federal and state regulators to be notified of big class-action settlements.

Financial companies for years have warned that allowing more class-action lawsuits to proceed would increase their expenses, and that the higher costs would ultimately be passed on to consumers.

They’re also bitterly opposed to the consumer bureau’s proposal, arguing that arbitration “has long provided a faster, better, and more cost-effective means of addressing consumer disputes than litigation or class-action lawsuits,” said Richard Hunt, who leads the Consumer Bankers Association.

Experts predict that the consumer bureau, the brainchild of Sen. Elizabeth Warren (D-Mass.), is likely to dismiss those concerns.

The arbitration proposal will be finalized before President Barack Obama leaves office, according to a note Jaret Seiberg, an analyst at Guggenheim Securities, sent his clients this week. There’s “almost no chance” of Congress blocking the proposal from being implemented, he added.

“We believe this is a key priority for Democrats and consumer advocates,” Seiberg said in the note. “To us, there is almost no chance for this plan to get derailed. Our view is that [consumer bureau] staff believes this is the best way to protect consumers because the threat of class-action suits will keep financial firms from treating consumers unfairly.”