ALBUQUERQUE, N.M.—During Thursday’s CFPB field hearing here, the credit union difference was shared with the Bureau, particularly regarding its proposed rule to essentially eliminate arbitration clauses, which was released early Thursday, CUNA reported.
The proposal would effectively eliminate pre-dispute arbitration and would require financial institutions to insert language into their arbitration agreements reflecting this limitation.
The field hearing featured representatives from the CFPB, consumers and other stakeholders. Kevin Hammar of Aldridge, Hammar, Wexler & Bradley P.A. testified on behalf of CUNA. During his remarks, Hammar expressed dismay that credit unions continued to be lumped in with entities that prey on consumers.
“Our basic concern is the nature of the regulation, the one-size-fits-all approach,” he said. “In my experience in New Mexico, credit unions have neither used nor relied upon arbitration provisions in consumer credit relationships.”
Hammar added that credit unions may use such provisions when it comes to vendor agreements, but those do not fall under the scope of the bureau’s proposal. By including credit unions in this proposal, he said that the CFPB is continuing to add to the already heavy regulatory burden facing credit unions, CUNA reported.
“Right now, the threat of class action litigation in New Mexico as far as credit unions are concerned is largely theoretical. Many credit unions in New Mexico are justifiably leery of additional regulations particularly those that pose an increased risk of loss to members’ funds,” Hammar said.
“I think what everyone should remember is, a credit union is a member-owned cooperative. The funds that the credit union lends out are member funds,” he said. “The credit union has not gone out into the third market, they don’t have shareholders, they don’t engage in risky practices to raise funds. Those are the funds of the member-owners of the credit union, who in turn elect the board.”
CUNA noted that it has expressed concerns that the proposal would limit options for resolving disputes and could increase the incidences of frivolous class action litigation against financial institutions, which could cause members to suffer when costs rise and resources are depleted.