Martin Eakes’ opinion piece on the Consumer Financial Protection Bureau is correct in saying that credit unions pride themselves on treating their members fairly, which is why they usually resolve disputes with members without the need for arbitration.
CUNA and our state league partners have never made the claim that credit unions use or enforce arbitration clauses on a widespread basis. Both disputes with their members and the existence of arbitration clauses in credit union contracts are infrequent, and the evidence can be found in consistently high consumer ratings.
The movement’s member ownership structure means these institutions tend to pull out all the stops to work with members who may find themselves in a dispute with their credit union in order to come to a solution that is good for all parties.
Beyond that, if a member or group of members has a dispute that cannot be resolved, they have an additional recourse unavailable to customers of banks and other financial institutions: they can vote to remove the board of directors and replace management.
Credit union member-owners set the policies for their financial institutions, and they should be able to choose from a wide variety of resources to solve these disputes, including the use of arbitration clauses. While used infrequently in our industry, arbitration clauses can be an effective way to ensure the interests of the members and those of the credit union itself are protected when disputes arise.
This is important because when members bring a class action case against a credit union, one pool of members’ resources is essentially being moved to another pool of members, with plaintiffs’ attorneys taking their cut in-between. Removing the possibility of arbitration means members are forced to take their credit unions to court. And once there, the only winners are the plaintiff’s bar.
Having the option of an arbitration clause gives consumers, credit unions and their members a chance to stay out of the courts, thus adding a layer of protection for all members’ pooled resources. If credit unions choose not to use such clauses, or even warn their members about the perils of forced arbitration, that’s within their purview. But using a broad, sweeping rule that applies equally to the community credit union on Main Street and the biggest banks on Wall Street doesn’t make sense, and certainly doesn’t benefit the consumer.
The CFPB should be using its rules to stand up to those who abuse consumers, not depriving demonstrably consumer-friendly entities of every tool at their disposal to do what’s best for their members.
Ryan Donovan is chief advocacy officer for the Credit Union National Association