A proposed rule by the Consumer Financial Protection Bureau (CFPB) could force credit union members to bypass an efficient, cost-effective dispute resolution process and instead yield a greater number of class action lawsuits against credit unions.
What the proposal would do
- Eliminate arbitration clauses that are routinely included in many contracts for consumer financial products. These clauses can protect credit unions from class action lawsuits when requiring arbitration as an alternative dispute resolution process.
- Financial institutions could still include arbitration clauses for individual disputes, but not for class-actions. The CFPB would provide specific language that must be used in the contract.
- Require companies that use arbitration clauses to submit claims, awards and other related materials to the CFPB for monitoring. According to the proposed rule, the CFPB intends to publish this material on its website in some form.
The Credit Union National Association (CUNA) has advocated that the rule is inappropriate for credit unions because their unique, cooperative structure incents credit unions to reach amicable resolutions with their member-owners.
Class action litigation against a member-owned credit union essentially puts members in the position of suing themselves. Credit union member-owners already have a recourse to remove the board of directors and management using the one-member, one-vote membership powers.
Weigh in on the proposal by submitting your comments, either to CUNA by Aug. 12 or directly to the CFPB, by Aug. 22.
The League encourages credit unions to influence their regulatory environment through the comment process.
Contact Paul Guttormsson, League Regulatory Counsel & Director of Compliance Services, at (262) 408-6009.
The Unite for Good effort is an internal growth strategy developed by CUNA in conjunction with its Board, state leagues, credit unions and system partners. The plan's action steps – to remove barriers, increase awareness and foster service excellence–are aimed at helping more credit unions become their members' primary financial institution by compelling members to see credit unions as their best financial partner. Read more articles in our Unite for Good series.