The mission of credit unions is pretty straightforward: Promote thrift and provide access to credit for provident purposes, utilizing a not-for-profit, cooperative ownership structure. Credit unions exist to serve their members, not to make a profit for shareholders.

Unfortunately, credit unions today face several obstacles to fulfilling this mission, impeding them from offering consumer-friendly products and services to consumers, and innovating products to meet the evolving needs of the marketplace.

In the wake of the financial crisis, regulations coming from the CFPB and other agencies in Washington have been one-size-fits-all, subjecting credit unions, in many cases, to the same regulations aimed at curtailing self-admitted bad behavior by Wells Fargo, Bank of America, payday lenders and other abusers of consumers.

Credit unions were highly regulated before the financial crisis and never engaged in the abusive behavior that prompted the creation of the CFPB and the numerous rules promulgated from the agency, which swept all financial institutions into the same bucket as consumer abusers. Due to the bureau's one-size-fits-all approach, credit unions were forced to spend $6.1 billion between 2013 and 2015 coming into compliance with rules intended for Wall Street.

As a result of this resource drain, credit unions have had to pull back some consumer-friendly offerings and have been impeded from innovating. Overly broad rules have forced half of the credit unions that offer remittance services to leave the market or curtail offerings, and new mortgage rules have had a similar impact, making it more difficult to lend to consumers in need.

Over the past few months, the CFPB has slowed their firehose of new regulations. But, just as things were looking up, a new threat to consumer access to credit union services has emerged: Frivolous litigation.

Credit unions are finding themselves the target of predatory plaintiffs' attorneys because their relatively small size makes them an attractive target – they have fewer resources to fight frivolous claims and may be more likely to simply settle with the predator law firm rather than fight the baseless claims.

Over the past few months, hundreds of credit unions all over the country have received demand letters or been subject to legal action from a California-based law firm demanding immediate payment of thousands of dollars alleging violations of the Americans with Disabilities Act on their websites. There is much confusion in this space because neither Congress nor the Department of Justice, the federal agency charged with creating rules in this area, have created any clear standards for website accessibility and the only guidance is a private industry standard, WCAG 2.0 AA. Many credit unions are following or working toward this standard, but the attorneys bringing these cases have no interest in giving time and guidance that could serve consumers. Instead, they are racing to the court house to extract settlements and fees.

Similarly, credit unions are being targeted by plaintiffs' firms for highly technical violations alleged under the Telephone Consumer Protection Act when contacting their own member owners via cell phone or text message. The D.C. Court of Appeals agreed this month that more clear-cut and “reasonable” guidance is needed under the TCPA. Consumers want to receive information from their financial institution, especially in the cases of fraud alerts, account updates and other pertinent matters.

More recently, credit unions have also been threatened with litigation under a different legal theory for allowing their members the convenience of depositing their checks via mobile banking apps. Credit unions are being sued for making banking more convenient.

Credit unions have always been for common sense regulation. They are trying to do right by consumers, but they need to have the ability to come up for air between legal threats and thousands of pages of new rules to be able to continually, successfully serve consumers and provide innovative new products.

CUNA will continue our legal advocacy efforts seeking clarity on the many legal issues impacting credit unions in the courts. We will also continue with our 360-degree advocacy strategy advocating for Congress, the Justice Department and other agencies to take appropriate steps to make sure that credit unions are able to serve their members without unnecessary regulatory burden or fear of predatory litigation.

Ryan Donovan is Chief Advocacy Officer for CUNA. He can be reached at 202-508-6750 or rdonovan@cuna.coop.

Instant Insights /

Protecting Credit Unions During a Time of Legal Abuse

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