WASHINGTON–The CFBP’s proposed rules around arbitration agreements is being met with strong criticism that it is potentially a strong threat to credit unions.
In a comment letter to NCUA, CUNA said the “proposal will have the practical effect of largely eliminating arbitration as an option for credit union members, because it would be difficult for the membership as a whole to continue to subsidize it, while also potentially facing frivolous class action litigation.”
CUNA told the agency, which would have to enforce the rules should CFPB enact them, that “credit unions are less likely to have or to enforce arbitration clauses than many others in the financial services marketplace are; however, there are certainly credit unions that have them as part of their member agreements and believe it is important to preserve the option of limiting class action litigation. Additionally, the arbitration proposal has raised concerns about whether additional compliance considerations may arise when credit unions have relationships with third parties, who will not be subject to the rule and will continue their use of pre-dispute class action waivers. For example, credit unions who offer indirect automobile loans may have new compliance considerations if automobile dealers continue to use class action waivers while credit unions are prohibited from doing so.”
CUNA argued in its letter that the CFPB’s analysis of the use of arbitration clauses is outdated and stems from data collected between 2008 and 2012. Since that time CUNA said regulators have issued thousands of pages of guidance documents, research, and new regulations, and engaged in many other actions that have altered the financial marketplace, including collecting tens of thousands of complaints about numerous financial products and services, and issuing dozens of enforcement actions.
“It is important for the CFPB, as a data driven agency, to use the most recent and up-to-date information which reflects the current market trends,” CUNA wrote.
The trade group added, “As a result of this current complex regulatory environment, credit unions have expressed heightened concerns about protecting their memberships now, and in the future, from the potential of class action litigation. Pre-dispute arbitration clauses restricting litigants from filing or participating in a class action against them is one option for such protection, and credit unions are concerned that the CFPB’s proposal in practicality eliminates it. These concerns about protecting the resources of the over 100 million credit union members, particularly from frivolous class action litigation, keeps growing as new rules continue to pile up.”
A complete copy of the CUNA comment letter can be found in CUToday.info’s The gov here.