CUNA, along with trade associations representing nearly every community financial institution in America, wrote Senate leadership Monday to support repeal of the Consumer Financial Protection Bureau’s (CFPB) arbitration rule. The House passed its resolution to repeal the rule in July.
“For community financial institutions, loss of arbitration as a viable option would fuel continued industry consolidation, larger institutions, fewer communities without a dedicated institution and, ultimately, reduced consumer choice,” the letter reads.
The CFPB’s rule would restrict the use of arbitration clauses. It also requires companies to submit to the CFPB certain records about claims, counterclaims and awards issued in arbitration.
The letter goes on to say that the bureau failed to heed the findings of its own report on arbitration, which suggested it offers a better process and outcome for consumers, relative to class action lawsuits.
“In the cases reviewed in the CFPB report, class members received a little over $32 on average in class actions that took nearly two years,” the letter reads. “In arbitration proceedings, the CFPB found that the average award to a prevailing consumer was approximately $5,400 and settlements were generally reached within 5 months.”
CUNA’s most substantial concern with the rule is that it encourages members, against their best interest, to engage in litigation against the institution of which they are a member-owner. CUNA also believes the final rule hurts the ability of credit unions to limit class action lawsuits.
CUNA President/CEO Jim Nussle previously wrote to Senate leadership urging the vote to repeal, and outlined in a LinkedIn post how the rule is the latest example of the CFPB doesn’t understand the nature of credit unions.