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NAFCU, trades oppose petition to ban arbitration
NAFCU joined with several other trade associations to voice opposition to a petition made to the CFPB that would require the bureau to pursue a rulemaking to ban pre-dispute arbitration provisions in contracts for consumer financial services.
“Relying on the protections that Congress put in place when it enacted the Federal Arbitration Act (FAA), numerous businesses, including many companies that provide financial products or services, have for decades resolved consumer disputes by arbitration rather than through costly and burdensome litigation in our overburdened court system,” the groups wrote. “Arbitration reduces transaction costs and enables fair, speedy, and efficient dispute resolution, thereby providing significant advantages to consumers, businesses, and the public at large. Petitioners offer no valid basis for depriving the public of these advantages, and there is none.”
The groups outlined several reasons for the bureau to deny the proposal, including:
- the 2017 Congressional Review Act (CRA) resolution that disapproved of the CFPB’s arbitration rule prevents the bureau from promulgating a rule that is “substantially the same”;
- the bureau does not have statutory authority to promulgate the petitioned rule without conducting a study and demonstrating that “any regulation that it proposes is ‘consistent with the study,’ in addition to demonstrating that the regulation is ‘in the public interest and for the protection of consumers’”; and
- the petition also contradicts the FAA and the Supreme Court’s recognition “that the FAA was designed to promote arbitration.”
NAFCU supports consumer protections, but has argued the CFPB’s efforts targeting arbitration were unfounded and would create unintended consequences for credit unions and their members.