Nussle to Senate Judiciary: Don’t End Arbitration

President/CEO of America’s Credit Unions says arbitration process is valuable

America’s Credit Unions President/CEO Jim Nussle this week urged Senate Judiciary Committee Chairman Sen. Dick Durbin, D-Ill., to abandon any plans that might alter the mandatory arbitration system some credit unions use to resolve disputes with members.

“Arbitration can be an efficient means to resolve legal disputes between parties and the choice to include arbitration agreements in contracts is highly dependent on the credit union’s policies, priorities, and resources,” Nussle wrote in a letter to Durbin.

The Judiciary Committee held a hearing on arbitration on Tuesday. The hearing featured witnesses who said they were harmed by having to go through arbitration after filing complaints, such as sexual harassment allegations, against their employers.

During the hearing, Durbin indicated that he has serious problems with the current system of mandatory arbitration. “Instead of having their day in court, [people] are forced into arbitration by the fine print buried deep in employment contracts, product manuals, and terms of service,” he said. The process, he added, is overseen by arbitrators who often are biased toward corporations and who are not bound by precedent.

That’s not the case with consumer complaints, Nussle said, adding that empirical evidence shows that consumer claimants who go through arbitration fare better, or at least as well, as consumer claimants in court.

Nussle said that more credit unions are adopting arbitration agreements because the threat of “frivolous” class action lawsuits has grown rapidly during the past several years. He added that despite the claims of attorneys who represent plaintiffs, class action litigation is time-sensitive, inefficient, and costly.

“It is important, when considering laws that would ultimately limit options to resolve disputes, for Congress to recognize the substantial harm that expensive, protracted litigation levy on credit unions and their members,” Nussle wrote.

Credit union members are in a unique position because if a group of them feels a credit union is in the wrong, those members may have direct recourse as member-owners with voting rights, according to Nussle. He pointed out that if credit union members file suit, they essentially are suing themselves, since members own credit unions.

Given the gridlock that has infected Capitol Hill, Congress is unlikely to make changes to the arbitration system this year. However, depending on the composition of the next Congress, some changes might be on the table.