CUNA’s comment letter to the Consumer Financial Protection Bureau (CFPB) reminds the agency that proposed changes to its arbitration process are inappropriate for member-owned, not-for-profit financial cooperatives.
“We strongly urge the CFPB to scrutinize the function of any rule not narrowly tailored to address specific consumer abuses and determine whether it is in the best interest of consumers served by credit unions. Protecting credit unions from threats, such as frivolous class action litigation, is synonymous with consumer protection,” the letter reads.
The letter, sent Thursday, also noted that despite being heavily regulated, credit unions have succeeded as consumer protectors without the intervention of class action lawyers, who are less familiar with members than are credit unions. Credit unions frequently work with members to provide refunds, work out payment plans, and find other dispute resolutions--often in an efficient, cost-effective manner.
The proposed rule would eliminate arbitration clauses that are routinely included in many contracts for consumer financial products. The clauses can protect credit unions from class action lawsuits when requiring arbitration as an alternative dispute resolution process.
“Overall, the most substantial concern credit unions have with this proposal is that it encourages members, against their best interest, to engage in litigation against the institution of which they are a member-owner,” the letter said.
The unique structure of credit unions already gives members a direct means of recourse--that of voting to remove the credit union’s board of directors and management with their one-member, one-vote membership powers.
CUNA urged CFPB to take this distinction into consideration as it moves toward a final rule.