Reinstating the Consumer Financial Protection Bureau’s (CFPB) rule on arbitration agreements would undermine the ability of credit unions and other financial institutions to offer faster, more cost-effective resolutions to potential disputes than class action litigation, CUNA wrote to members of Congress Tuesday. CUNA joined other financial trade organizations to oppose an amendment to the Consumers First Act (H.R. 1500) that would reinstate the rule.
The CFPB’s arbitration rule, overturned via the Congressional Review Act in November 2017, would restrict the use arbitration clauses.
“The Bureau’s own examination of arbitration found it to be a faster, more cost-effective, and higher recovery alternative to class action litigation in resolving consumer disputes. In fact, arbitration is up to 12 times faster than litigation in providing consumers with a resolution to their dispute,” the letter reads. “Additionally, the CFPB’s study found the average cash relief for consumers in arbitration is a notable $5,400 and for consumers in class action a meager $32.
The facts are simple – consumers in class actions receive pennies on the dollar while trial lawyers have collected approximately $424 million in fees over the period studied, an average of more than $1 million per case,” it adds.
The CFPB’s study also noted that the rule would lead to higher litigation costs, which would in turn be passed along to consumers through higher prices or reduced quality of products or services.
The House is expected to consider H.R. 1500 and its amendments in the coming days.
CUNA was joined on the letter opposing the amendment by the American Bankers Association, Bank Policy Institute, Consumer Bankers Association and the National Association of Federally Insured Credit Unions.