Restore member rights at WSECU (the Washington State Employees Credit Union)

+ For WSECU’s 9-30-22 four-page notice of the new policy of forced arbitration and against class-action lawsuits which went by U.S. mail to all 280,000+ members, click here.

+ For the two-page Frequently Asked Questions (FAQ) that WSECU is using internally to coordinate responses to questions about the new policies from members and the public, click here.

+ For information to be found on the WSECU web site about the Oct. 21, 2022 deadline for nominations to the board of directors and how to submit your name, click here.

+ For how the right to join a class action lawsuit protects credit union member-depositors and helps keep financial institutions well-managed and accountable, see the research and comment record of the 2012-2017 rulemaking by the Consumer Financial Protection Bureau. Click here.

+ For the limits and drawbacks of binding arbitration, see The Arbitration Epidemic, a report by the Economic Policy Institute. Click here.

Federal reform denied. The Consumer Financial Protection Bureau (see the above link to the research and comment record), which the U.S. Congress created in the wake of the global financial crisis of 2007-11, finds that the customers of credit unions, banks, and other financial institutions are not well served when denied their rights to class action lawsuits and civil jury trials, while being forced into binding arbitration. CFPB emphasizes that the possibility of a class action lawsuit deters companies from violating the law. “When companies know they are more likely to be held accountable by consumers for any misconduct, they are less likely to engage in unlawful practices that can cause harm. Further, public attention on the practices of one company can more broadly influence their business practices and those of other companies.”

A study by the Economic Policy Institute (a link to its report is provided above) finds “repeat-player advantage,” wherein companies win cases over their customers more often when they appear before the same arbitrator, while the customer usually appears before that arbitrator only once. Also: “Arbitration may not provide parties with the same extent of discovery that a court would, and arbitration clauses can shorten statutes of limitations, alter the burdens of proof, limit the amount of time a party has to present his or her case, or otherwise impose constrictive procedural rules. Arbitrators are often reluctant to award generous damages to prevailing parties, and their awards are not appealable. Because the chances of winning in mandatory arbitration are lower and damage awards are smaller, consumers and employees have difficulty finding lawyers willing to take arbitration cases on a contingency basis. Hence, the arbitration epidemic discourages many consumers and employees from bringing their claims in the first place.”

On July 10, 2017 after five years of research and public process, the CFPB issued a final rule prohibiting credit unions, banks, and similar financial institutions from requiring that, as a condition for doing business that users of their bank accounts and other financial services give up their rights to participate in class action suits(including and jury trials) and be forced to accept arbitration.

But this was the first year of Donald Trump’s presidency, when the Republican Party controlled both houses of Congress. Seeing an opportunity and acting quietly and contrary to the interests of their member-depositors, credit unions and/or their trade associations lobbied Congress to strike down CFPB’s new rule under the Congressional Review Act. Without a single Democratic member of the House or Senate voting against CFPB’s new rule, it was nevertheless struck down by a House vote of 231-190 and a Senate vote of 50-50, with the tie broken by then-Vice President Pence, who cast his vote against the new rule. On Nov. 1, 2017, Trump signed the joint resolution striking down CFPB’s rule.

WSECU didn’t deliver on our higher expectations. Unlike banks, credit unions are cooperatives. They are not-for-profit and they are actually owned and governed by their member-depositors (although the boards of directors they elect do not always act in the members’ interest). Many credit unions continue to respect their members’ right to participate in class action lawsuits and civil jury trials, as with the state’s largest credit union, BECU (Boeing Employees Credit Union). Since 2002, membership in BECU has been open to all who live, work, worship, or attend school in Washington.

Sadly, the Washington State Employees Credit Union, which ranks as the fourth largest credit union in Washington (and since 2013 has been open to all who live, work, worship, or attend a state university) is now acting against its members’ rights and interests. WSECU announced the new policy in a four-page announcement dated 9-30-22 and sent by U.S. mail to its its more than 280,000 members. WSECU has taken away their right to participate in a class-action lawsuit or a civil jury trial, and has forced binding arbitration on them. Current members are allowed to opt out of the arbitration requirement only within 30 days of when WSECU sent out the Sept. 30 notice; new members are allowed to opt out of the arbitration requirement only within the first 30 days of their membership.

And there is no way for members to opt out of the prohibition on class action lawsuits or civil jury trials. This is explained in the last paragraph of the four-page notice, which reads in part: “Opting out of the arbitration requirements will not terminate this Agreement, including, without limitation, the Class Action Waiver and the Jury Trial Waiver provided for above….” This interpretation is also that of WSECU’s legal counsel as quoted in an e-mail sent to the present author 10-12-22 by a WSECU official: “Opt out rights only apply to the arbitration provisions. So if they opt out, they do not have to arbitrate disputes. However, the Class Action Waiver and Jury Trial Waiver will continue to apply, so they will need to bring their claim individually (only for themselves) and it will not be a jury trial.”

WSECU adopted the new policy with no prior notice to the 280,000+ member-depositors, keeping them in the dark and giving them no opportunity for input or to object before the policy was adopted. Even now (the date is 10-15-22 and counting), this policy reversal is not mentioned anywhere on WSECU’s web site or its Facebook, Twitter, Instagram, or LinkedIn accounts.

To make matters worse, WSECU presents in the mailed notice (p. 1) an insulting case for the change, in stating that “The credit union is adopting this new process as part of its ongoing focus on member service and to protect the credit union and its members from potentially unnecessary, expensive and time-consuming lawsuits.” Hey up there! The credit union consists of and is owned by its members; it is not separable from them. The new policy “protects” the credit union only from its own members, and at the cost of denying their longstanding right to go to court to ensure its accountability to the laws. Expense and time that produce a just result are well spent. If a credit union is managed well and fairly, a lawsuit will not get very far, and judges take a dim view of lawsuits that are unnecessary.

Class action lawsuits are essential as a way to prevent bad practices in banking, which often are the accumulation of small but constantly repeated injustices that any single banking customer and attorney cannot afford to challenge. When many plaintiffs join together in a class action lawsuit, they can afford an attorney who can make a proper case to the court, and can benefit all by splitting what the court awards, and by deterring the unfair banking practices in the future.

What to do, and how you can help. Given the sad story above, some disappointed members will just give up on WSECU and take their money to another credit union (most of which have not adopted WSECU’s mistaken policies). But first, please give it a try to help in our effort to save WSECU from itself. For an organization like WSECU that is owned and governed by its own member-depositors, it is never too late to reverse an anti-member policy, especially with this case when there was no prior notice to or consultation with the membership.

WSECU’s CEO and its board of directors should withdraw the new policy and restore the longtime rights of the members to participate in class action lawsuits and in civil jury trials. None of the boardmembers’ candidate statements disclosed that they were in favor of erasing such basic member rights or would depart so grievously from WSECU’s culture of transparency and consultation. To write to them, click here for the on-line comment form and the U.S. mail address.

To turn WSECU back from its recent wrong turn, member volunteers are needed to help build a presence on Facebook, Twitter, Instagram, LinkedIn and other social media platforms, and to provide comments and links on WSECU’s platforms. Please help organize petitions and letter-writing, including to newspapers. Please hand out fliers to other WSECU members, and help organize meetings with WSECU officials. Please suggest additional ways to get the word out and to get a better result. We can make a difference

And one other thing: by this Friday’s Oct. 21, 2022 deadline, WSECU members with a business, non-profit, legal, or financial background should nominate themselves for a board position; and/or should urge someone else to apply. There are three seats up for election on the board of directors and one seat on the supervisory committee. For the WSECU web site’s info on how to submit a nomination, click here.

To follow up. To info@public-interest.us, we welcome and need your questions, suggestions, submissions, corrections, etc. about this web page and the issues raised. The author has been a WSECU member since 1986.