Banks and credit unions are often fierce rivals. But for some reason, credit unions are now lending their good name to a fight on Wall Street’s behalf that will hurt credit unions.
Powerful financial interests are pushing the Senate to vote to strip Americans of their access to the courts by killing the new arbitration rule from the Consumer Financial Protection Bureau. The rule stops companies that harm millions from using fine-print clauses to prevent people from teaming up in class actions.
Forced arbitration is a powerful get-out-of-jail-free card for financial giants. They have good reason to fight to kill the CFPB rule. Wells Fargo used forced arbitration clauses to suppress lawsuits over its 3.5 million fake accounts. Equifax compromised the sensitive financial information of 145 million people, then appeared to use fine print to try to block people who signed up for free credit monitoring from filing or joining any lawsuit “relating in any way to Your relationship with Equifax.” TransUnion, another massive credit reporting agency, has also tried to “actively mislead” people into giving up their access to the courts. But fortunately, TransUnion could not stop a class action that helped thousands of people — including active duty service members serving abroad — who were recklessly mismatched with terrorists and criminals on a government watch list.
But why are credit unions putting their face on, and risking their good name by taking on, Wall Street’s fight? The vast majority of credit unions do not use forced arbitration. Credit unions are small institutions that haven’t been caught up in Wall Street’s excesses.
The Credit Union National Association (CUNA) opposes the arbitration rule. Yet the CFPB’s comprehensive study found that 97% of credit unions have no arbitration clauses in their credit card contracts. Only 8% of banks and credit unions — primarily large banks — have the clauses in their checking account agreements.
It’s hypocritical for CUNA to oppose the rule, since small credit unions know it’s important for the little guy to be able to team up to confront powerful interests that cause widespread harm. CUNA filed its own class action against Equifax for the damage caused to credit unions by the credit bureau’s data breach. Yet CUNA is fighting to block a rule that would have prevented Equifax from slipping language into its free credit monitoring terms that blocked individuals from filing or joining any lawsuit against the company.
The National Association of Federally-Insured Credit Unions also supports overturning the rule. Yet NAFCU admitted that “our members report very minimal usage, if any, of similar [arbitration] clauses. Credit unions, as not-for-profit, member-owned financial cooperatives, strive to work with their members directly to resolve any issues.”
An official of Alaska USA Federal Credit Union and the Alaska Credit Union league ran an op-ed against the rule. But neither Alaska USA nor any other Alaskan credit union appears to use forced arbitration clauses.
Lobbyists are attempting to make the argument with Maine’s independent-minded senators that the CFPB rule will harm credit unions and small banks. Yet a new survey found that not one credit union or community bank in Maine uses a forced arbitration clause in its own agreements. Only Ohio-based KeyBank, the second-largest bank with branches in Maine, utilizes forced arbitration agreements in the New England state (and has used arbitration clauses to block class actions by defrauded students and people hit with overdraft fees when their accounts weren’t overdrawn).
Credit unions exist to serve their members. If they listen to their members, they will oppose efforts to strip Americans of their day in court. Two-thirds of those polled by a Republican polling firm support the rule, including a majority of Republicans and respondents who identified as “very conservative.” The Military Coalition, The American Legion, 29 leading servicemember and veterans groups, prominent conservative voices, 423 professors, and 310 consumer, civil rights, labor and community groups do so as well.
Americans stripped of their day in court can’t pour millions into the coffers of members of Congress, like financial giants can. They are the little guy, just like credit unions.
