Two former Vermont attorneys general are decrying a move by New England Federal Credit Union to block class-action lawsuits against its management.
In a letter sent to credit union members on Sept. 5, NEFCU Chief Executive Officer John Dwyer told members that if they wish to participate in any future class-action lawsuits against management, they must opt out of provisions to move all disputes to binding arbitration.
The letter did not specify what, if any, matters could be the subject of lawsuits against management. The letter from Dwyer went out to both New England Federal Credit Union members and VSECU members, said VSECU spokesperson Yvonne Garand.
Former Vermont attorneys general Jerome Diamond and Kimberly Cheney, both members of Vermont State Employees Credit Union, are urging fellow members to opt out and preserve their right to join in class-action lawsuits against management.
Cheney is a former board member of VSECU, whose members narrowly approved a merger with NEFCU last year. He urged fellow members in a Sept. 13 post on Front Porch Forum to “OPT OUT and preserve your right to seek justice.”
Cheney and Diamond opposed the merger, arguing that Vermonters would lose control of the institution.
“This thing has no benefit to members,” Cheney told VTDigger in an interview this week.
Asked why he thought the NEFCU management is moving toward arbitration of any disputes with members, Cheney said: “They’re scared they’ll get sued and be held accountable.”
Cheney emphasized that he does not know of any wrongdoing that management should worry about.
“Binding arbitration and waiver of class-action lawsuits benefits only the corporation, does not protect the members at all,” said Diamond, a former chairman of the board of VSECU. “Throughout time, access to an attorney and a court and a jury of your peers has been the best ability to seek justice in righting the wrongs that you perceive that you have against an entity like the credit union.”
The letter from the credit union gives members until Oct. 5 to opt out if they want to preserve their right to join a class-action lawsuit.
In his post on Front Porch Forum, Cheney suggested that a class action lawsuit could arise if a security breach allowed money to be siphoned out of members’ accounts.
Recent class action lawsuits have targeted Harvard University Employees Credit Union, Redstone Credit Union in Alabama, Desert Financial Credit Union in Arizona, Empower Federal Credit Union in New York, Navy Federal Credit Union in Virginia, Credit Union of New Jersey and R.I.A. Federal Credit Union in Iowa for overdraft fees.
“Class action lawsuits are the biggest reform in this country,” Cheney told VTDigger, citing class action suits against tobacco companies, opioid manufacturers and car makers. “It’s class action lawsuits that brought misbehaving corporations to the table.”
But Garand said these types of agreements and waivers are not out of the ordinary.
“Arbitration agreements and class action waivers are not uncommon today,” Garand said in an email to VTDigger. “The credit union implemented the agreement as a best practice to protect the assets of our member-owners.”
Cheney and Diamond do not buy that argument.
“They purchase insurance, which is a normal operating expense for any company to protect them from liability lawsuits,” Diamond said. “So they’re already protected. What you’ve got is them trying to convince their members to give up their rights.”
Deputy Commissioner of Banking Aaron Ferenc said the Department of Financial Regulation does not track how common these arbitration agreements and class action waivers are in Vermont.
“They are more common with larger financial institutions than they are with a smaller local institution in Vermont,” Ferenc said.
