WASHINGTON—NAFCU has joined with several other trade associations, including the American Bankers Association and the Community Bankers Association, to urge lawmakers to oppose legislation the groups allege could hurt consumers, small businesses, and employees by removing arbitration provisions in private contracts.
"Federal law has protected arbitration as a means of resolving disputes between businesses, consumers and employees since 1925," the joint letter reads. "Should [H.R. 963 and S. 505] become law, these bills will not benefit claimants and will instead produce more class action lawsuits that will benefit the lawyers who bring them."
The letter states that in cases of arbitration, "courts work to ensure that arbitration agreements of all types are fair and do not provide an advantage to any party."
"The only clear beneficiaries of eliminating arbitration clauses are class action lawyers who would directly benefit from increased class action litigation replacing cost-effective and fair arbitration as a viable way to resolve disputes," the groups wrote. "Studies have shown that class action settlements frequently provide, at best, a very low return to class members while class action attorneys take in millions of dollars.
‘At Expense of Consumers’
"Their gain would come at the expense of consumers, small businesses and employees, many of whom are not even eligible to participate in class action litigation. And because their claims are too small to attract individual legal representation, they would be left without a remedy altogether if arbitration were eliminated," the groups concluded.