Removing Barriers Blog

Credit Union Representative Participates in CFPB Hearing on Forced Arbitration
Posted October 07, 2015 by CUNA Advocacy

Earlier today, John Rudy, senior vice president and chief lending officer at affiliated Bellco Credit Union, participated in the Consumer Financial Protection Bureau’s (CFPB) field hearing on arbitration. Immediately prior to its hearing, the CFPB published an outline of the proposals under consideration in preparation for convening a Small Business Review Panel as part of the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) to gather feedback from small industry stakeholders. This included a list of questions for SBREFA panelists and a fact sheet summarizing SBREFA. We are currently reviewing this proposal to determine whether there are any adverse implications for credit unions.

The Dodd-Frank Act required the CFPB to study the use of arbitration clauses in consumer financial markets and gave the Bureau the power to issue rules. The agency released a long awaited study on arbitration last March. At 728 pages long, it was extremely critical of the use of pre-dispute arbitration agreements—not surprisingly, it incurred considerable push back from some participants in the financial services industry. Today’s proposal includes substantial changes to arbitration agreements for a number different of consumer financial products and services, and CFPB staff indicated that the Bureau is considering a prohibition on class-action bans in the markets it oversees. 

The hearing was held at History Colorado Center, in Denver, CO, where CFPB Director Richard Cordray provided opening remarks. Participating panelists, including Mr. Rudy, also provided opening remarks and answered questions. In his remarks, Mr. Rudy talked about Bellco Credit Union’s desire to keep credit union members satisfied, and about their success in resolving disputes outside of litigation. He also highlighted the credit union member-focused approach. 

The question and answer portion of the hearing was moderated by David Silberman, the Bureau’s Associate Director for Research, Markets, and Regulations. He asked panelists several questions including, “what alternatives are currently available to consumers who cannot band together to seek relief before the court?” In his response on behalf of credit unions, Mr. Rudy noted that arbitration should be the last line of defense. He also discussed other ways to avoid disputes such as mediation and filing complaints with the many institutions that already regulate credit unions. 

We will update members as we continue to review today’s proposals. Also, make sure to visit the COMP Blog for more information on arbitration. A video of today’s hearing should be available on the CFPB's site in the next few days.