WASHINGTON (12/2/15)--The Consumer Financial Protection Bureau (CFPB) failed to adequately study the use of arbitration clauses before issuing a proposal that could restrict their use and federal lawmakers should block the bureau from finalizing its plan in the absence of such a study.
That is a key point made by CUNA and partners--representing businesses of all sizes and sectors of the economy--in a Dec. 1 letter to member of the U.S. Senate and House committees on appropriations.
The Dodd-Frank Act required the CFPB to study arbitration clauses in consumer financial contracts prior to regulating these clauses to determine if new rules were even justified by the study’s findings. While the CFPB executed such a study, the joint letter says that study failed to address important questions.
The joint letter strongly supports an existing amendment to the omnibus federal government appropriations bill. It would require the CFPB go back and conduct a new, fair and comprehensive study before adopting its rule that would "open the door widely to abusive class actions that benefit lawyers and harm consumers."
Once the study is completed, the amendment would authorize the bureau to regulate arbitration clauses as long as it demonstrates, based on empirical evidence, that the benefits to consumers would not be outweighed by the costs to consumers.
"It is critical that Congress intervene to ensure the CFPB does not act hastily and unfairly to restrict an important and accessible means of consumer redress," the CUNA coalition said.
CUNA is closely monitoring the big appropriations bill, as funding for the U.S. government is set to expire Dec. 11. The legislation is important to credit unions because the bills from both chambers include credit union-supported provisions.
The Senate bill has nearly a dozen CUNA-backed regulatory relief provisions that would benefit credit unions. The House version include measures related to the CFPB's structure.