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HCUA Comments on CFPB Proposed Arbitration Rule

Heartland Credit Union Association (HCUA) submitted a comment letter on behalf of member credit unions to the Consumer Financial Protection Bureau (CFPB) regarding its proposed arbitration rule. The proposed rule would eliminate arbitration clauses that are routinely included in many contracts for consumer financial products. These arbitration clauses can protect credit unions from class action lawsuits when requiring arbitration as an alternative dispute resolution process.

Under the proposed rule, financial institutions could still include arbitration clauses for individual disputes, but not for class action lawsuits. The CFPB would provide specific language that must be used in the contract. The proposal also requires companies that use arbitration clauses to submit claims, awards, and other related materials to the CFPB for monitoring.

"HCUA strongly urges the CFPB to reconsider whether limiting arbitration clauses is in the consumer’s best interest," writes Brad Douglas, HCUA president/CEO. "We believe the CFPB and credit unions should be working together to serve consumers, and any proposals should focus on specifics rather than an overly broad approach. This proposal creates a risk for the consumers served by credit unions, and those that benefit by having credit unions in the marketplace."

The letter expresses concerns with the proposed rule, in that it may force credit union members to bypass an efficient, cost-effective dispute resolution process. Letters were due to the CFPB on August 22.

Click here to view the entire letter.