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NAFCU: Arbitration Modifications Helpful, but Need Some More Work

HERNDON, Va.-NAFCU recently wrote a comment letter to NACHA-the Electronic Payments Association-in support of amendments to its arbitration rules but expressed some concerns about particular provisions. NAFCU President and CEO Fred Becker said that generally, the changes to the rules should make it easier for federal credit unions to resolve...

By Staff Writer | Updated on June 17, 2003

HERNDON, Va.-NAFCU recently wrote a comment letter to NACHA-the Electronic Payments Association-in support of amendments to its arbitration rules but expressed some concerns about particular provisions. NAFCU President and CEO Fred Becker said that generally, the changes to the rules should make it easier for federal credit unions to resolve errors. The trade group did disagree with the arbitrator’s payment being based upon the damage award. “If the stipend is calculated as a percentage of the damage award, it could provide an incentive for the arbitrator(s) to inflate the amount of the damage award,” Becker explained. He recommended fixed stipends. Under the proposal, Procedure A complaints (amount claimed between $250 and less than $10,000) would pay arbitrators $100, but moving up from there, Procedure B (amount claimed between $10,000 and less than $99,999) arbitrators are given 1% of the award as a stipend and Procedure C (amount claimed $100,000 and up) are given a 1.5% of award stipend. NAFCU also supported adding a third classification for arbitration procedures but did not think the maximum claim under Procedure A should be lowered without justification. NAFCU Associate Director of Tax and Accounting Bill Hall said the organization suggested the claim amounts be set at $250 to $24,999 for Procedure A; $25,000 to $99,999 for Procedure B; and $100,000 or more for Procedure C. Hall pointed out that only three cases had been handled under NACHA’s current arbitration rule, probably because both parties had to agree to arbitration. The proposal would only require one party to request arbitration for Procedures B and C. Hall speculated that the reasoning behind the amendments could be that NACHA would like to keep its rules within the organization rather than have courts interpreting them.

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