Removing Barriers Blog

CUNA Concerned with the CFPB's Finalized Arbitration Rule

The Consumer Financial Protection Bureau (CFPB) finalized its rule on arbitration.  While CUNA is currently analyzing the nearly 800-page final rule, we are disappointed that the CFPB continues to apply new rules to credit unions where there is no evidence of consumer abuse by credit unions. 

The CFPB’s rule will eliminate the ability to use pre-dispute arbitration agreements to prohibit class actions. We have concerns this will limit options for resolving disputes and could increase the incidences of frivolous class action litigation against credit unions, which could cause members to suffer when costs rise and resources are depleted.  

Since credit unions are owned by their members, and, as not-for-profit financial cooperatives, they have incentive to and a long history of prioritizing the needs of their members and as a result, the CFPB should have taken these differences into account instead of treating credit unions like the large Wall Street Banks that have abused consumers.  

The final rule unfortunately hurts the ability of credit unions to limit class action lawsuits. It also requires companies to submit to the CFPB certain records about claims, counterclaims and awards issued in arbitration, which raises privacy concerns. 

However, CUNA’s most substantial concern with the rule is that it encourages members, against their best interest, to engage in litigation against the institution of which they are a member-owner. Last August, CUNA had urged the bureau to exempt credit unions from the rule, saying it is inappropriate for member-owned financial cooperatives.  In its comment letter, CUNA also noted that despite heavy regulations credit unions have succeeded as consumer protectors without the intervention of class action lawyers, who are less familiar with members than are credit unions. 

CUNA will continue to urge the CFPB to exempt credit unions from this rule.  Credit unions frequently work with members to provide refunds, work out payment plans, and find other dispute resolutions -- often in an efficient, cost-effective manner.