The Consumer Financial Protection Bureau’s (CFPB) arbitration proposal tells credit union members to bypass an efficient, cost-effective resolution process and head straight to the courthouse, CUNA told a U.S. House subcommittee Tuesday. The House Financial Services subcommittee on financial institutions and consumer credit will conduct a hearing Wednesday examining the proposal, a hearing requested by CUNA.
The CFPB’s proposal would effectively eliminate pre-dispute arbitration and would require financial institutions to insert language into their arbitration agreements reflecting this limitation.
“As the only consumer-owned cooperatives in the financial marketplace, credit unions have a tradition of protecting their members’ interests, and in most instances are able to amicably resolve any disputes that arise,” wrote CUNA President/CEO Jim Nussle in a letter submitted for the hearing’s record. “Nevertheless, arbitration can be a helpful alternative for credit unions and their members to resolve differences in a fair, efficient, timely, and cost-effective manner.”
The CFPB’s proposal is troublesome for credit unions for at least two reasons.
First, as member-owned financial cooperatives, class action litigation against a credit union essentially puts members in the position of suing themselves. Also, in the rare situation in which members may feel they are wronged, credit union member-owners already have a recourse to remove the board of directors and management using the one-member, one-vote membership powers.
“This seems like yet another missed opportunity to really target any problematic behavior, and instead takes an overly broad approach that completely eliminates an option which, indisputably, can be a much better option than class action litigation for consumers and the economy,” Nussle wrote. “Credit unions strongly support treating consumers fairly as evidenced by the extremely high satisfaction level of our members.
“However, stacking the cards against credit unions by creating arbitrary regulations, coupled with making it easier for plaintiffs attorneys to target them with frivolous class action litigation, is not helpful for consumers or those working to serve them,” he added.
CUNA is also troubled by:
The subcommittee hearing is scheduled for Wednesday at 2 p.m. (ET).