U.S. Representative Ed Royce (R-Calif.) questioned witnesses on the impact of eliminating class-action lawsuit waivers on credit unions and community banks during a Financial Institutions and Consumer Credit Subcommittee hearing entitled “Examining the CFPB’s Proposed Rulemaking on Arbitration: Is it in the Public Interest and for the Protection of Consumers?”
“Community financial institutions, such as credit unions and community banks, have to maintain strong personal relationships with their customers. At a time of unprecedented regulatory burdens, their success depends upon this. To Mr. Hong, how does the arbitration process benefit consumers and contribute to better relationships between consumers and their community financial institutions? What will happen when the CFPB opens up credit unions and community banks to class-action lawsuits?” asked Rep. Royce.
“One of the benefits arbitration can provide them, is the fact that they’ve developed these dispute resolution processes that are more informal and convenient for consumers in nature. So if you take away their ability to offer those types of proceedings, you potentially open them up for dramatic increases in class-action litigation risk. In those instances, they will probably have to have a conversation with at least their prudential regulators about how they should take compensatory actions on …read more
Source:: U.S. Rep. Ed Royce