Credit unions may find themselves in court more often if the CFPB acts on its proposed ban on class action waivers in arbitration clauses – a change some industry experts said could inflate compliance costs and eliminate products and services.
The proposed rules, announced Oct. 7, would make it illegal for contracts for many types of consumer financial products to have arbitration clauses that prevent members from participating in class action lawsuits. In the CFPB's cross-hairs are credit unions, banks, card issuers, auto lenders, private student lenders, loan originators, money-transfer providers and a host of other financial services firms. It may also add payment processors to the list, it said.
"Consumers should not be asked to sign away their legal rights when they open a bank account or credit card," CFPB Director Richard Cordray said. "Companies are using the arbitration clause as a free pass to sidestep the courts and avoid accountability for wrongdoing."
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