Bill Text: NY A02656 | 2019-2020 | General Assembly | Introduced
Bill Title: Relates to prohibiting mandatory arbitration clauses in financial product or service contracts.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2020-01-08 - referred to consumer affairs and protection [A02656 Detail]
Download: New_York-2019-A02656-Introduced.html
STATE OF NEW YORK ________________________________________________________________________ 2656 2019-2020 Regular Sessions IN ASSEMBLY January 24, 2019 ___________ Introduced by M. of A. LENTOL -- read once and referred to the Committee on Consumer Affairs and Protection AN ACT to amend the general business law, in relation to prohibiting mandatory arbitration clauses in financial product or service contracts The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. The general business law is amended by adding a new section 2 399-c-1 to read as follows: 3 § 399-c-1. Mandatory arbitration clause in financial product or 4 service contracts prohibited. 1. Definitions. 5 a. The term "consumer" shall mean a natural person residing in this 6 state or an agent, trustee, or representative acting on behalf of a 7 natural person residing in this state. 8 b. The term "covered person" shall mean: 9 (i) any person that engages in offering or providing a consumer finan- 10 cial product or service; and 11 (ii) any affiliate of a person described in subparagraph (i) of this 12 paragraph if such affiliate acts as a service provider to such person. 13 c. The term "financial product or service" shall mean: 14 (i) extending credit and servicing loans, including acquiring, 15 purchasing, selling, brokering, or other extensions of credit (other 16 than solely extending commercial credit to a person who originates 17 consumer credit transactions); 18 (ii) extending or brokering leases of personal or real property that 19 are the functional equivalent of purchase finance arrangements, if: 20 (1) the lease is on a non-operating basis; 21 (2) the initial term of the lease is at least ninety days; and 22 (3) in the case of a lease involving real property, at the inception 23 of the initial lease, the transaction is intended to result in ownership 24 of the leased property to be transferred to the lessee; EXPLANATION--Matter in italics (underscored) is new; matter in brackets [] is old law to be omitted. LBD04676-01-9A. 2656 2 1 (iii) providing real estate settlement services, except insurance or 2 performing appraisals of real estate or personal property; 3 (iv) engaging in deposit-taking activities, transmitting or exchanging 4 funds, or otherwise acting as a custodian of funds or any financial 5 instrument for use by or on behalf of a consumer; 6 (v) selling, providing, or issuing stored value or payment instru- 7 ments, except that, in the case of a sale of, or transaction to reload, 8 stored value, only if the seller exercises substantial control over the 9 terms or conditions of the stored value provided to the consumer where, 10 for purposes of this subparagraph: 11 (1) a seller shall not be found to exercise substantial control over 12 the terms or conditions of the stored value if the seller is not a party 13 to the contract with the consumer for the stored value product, and 14 another person is principally responsible for establishing the terms or 15 conditions of the stored value; and 16 (2) advertising the nonfinancial goods or services of the seller on 17 the stored value card or device is not in itself an exercise of substan- 18 tial control over the terms or conditions; 19 (vi) providing check cashing, check collection, or check guaranty 20 services; 21 (vii) providing payments or other financial data processing products 22 or services to a consumer by any technological means, including process- 23 ing or storing financial or banking data for any payment instrument, or 24 through any payments systems or network used for processing payments 25 data, including payments made through an online banking system or mobile 26 telecommunications network, except that a person shall not be deemed to 27 be a covered person with respect to financial data processing solely 28 because the person: 29 (1) is a merchant, retailer, or seller of any nonfinancial good or 30 service who engages in financial data processing by transmitting or 31 storing payments data about a consumer exclusively for purpose of initi- 32 ating payments instructions by the consumer to pay such person for the 33 purchase of, or to complete a commercial transaction for, such nonfinan- 34 cial good or service sold directly by such person to the consumer; or 35 (2) provides access to a host server to a person for purposes of 36 enabling that person to establish and maintain a website; 37 (viii) providing financial advisory services (other than services 38 relating to securities provided by a person regulated under article 39 twenty-three-a of this chapter, but only to the extent that such person 40 acts in a regulated capacity) to consumers on individual financial 41 matters or relating to proprietary financial products or services (other 42 than by publishing any bona fide newspaper, news magazine, or business 43 or financial publication of general and regular circulation, including 44 publishing market data, news, or data analytics or investment informa- 45 tion or recommendations that are not tailored to the individual needs of 46 a particular consumer), including: 47 (1) providing credit counseling to any consumer; and 48 (2) providing services to assist a consumer with debt management or 49 debt settlement, modifying the terms of any extension of credit, or 50 avoiding foreclosure; 51 (ix) collecting, analyzing, maintaining, or providing consumer report 52 information or other account information, including information relating 53 to the credit history of consumers, used or expected to be used in 54 connection with any decision regarding the offering or provision of a 55 consumer financial product or service, except to the extent that: 56 (1) a person:A. 2656 3 1 (a) collects, analyzes, or maintains information that relates solely 2 to the transactions between a consumer and such person; 3 (b) provides the information described in item (a) of this clause to 4 an affiliate of such person; or 5 (c) provides information that is used or expected to be used solely in 6 any decision regarding the offering or provision of a product or service 7 that is not a consumer financial product or service, including a deci- 8 sion for employment, government licensing, or a residential lease or 9 tenancy involving a consumer; and 10 (2) the information described in item (a) of clause one of this 11 subparagraph is not used by such person or affiliate in connection with 12 any decision regarding the offering or provision of a consumer financial 13 product or service to the consumer; 14 (x) collecting debt related to any consumer financial product or 15 service; 16 (xi) such other financial product or service as may be defined by the 17 attorney general, by regulation, for purposes of this section, if the 18 attorney general finds that such financial product or service is entered 19 into or conducted as a subterfuge or with a purpose to evade any state 20 consumer financial law; and 21 (xii) the term "financial product or service" shall not include any 22 such financial product or service regulated under the exclusive juris- 23 diction of a federal agency or authority, or where rules or regulations 24 promulgated by the attorney general on such financial product or service 25 would be preempted by federal law. 26 d. The term "mandatory arbitration clause" shall mean a term or 27 provision contained in a written contract for any financial product or 28 service, as defined in paragraph c of this subdivision, which requires 29 the parties to such contract to submit any controversy thereafter aris- 30 ing under such contract to arbitration prior to the commencement of any 31 legal action to enforce the provisions of such contract and which also 32 further provides language to the effect that the decision of the arbi- 33 trator or panel of arbitrators in its application to the consumer party 34 shall be final and not subject to court review. 35 e. The term "arbitration" shall mean the use of a decision making 36 forum conducted by an arbitrator or panel of arbitrators within the 37 meaning and subject to the provisions of article seventy-five of the 38 civil practice law and rules. 39 2. a. Prohibition. No written contract for any financial product or 40 service, entered into on or after the effective date of this section, to 41 which a consumer is a party, shall contain a mandatory arbitration 42 clause. Nothing contained herein shall be construed to prohibit a 43 covered person from incorporating a provision within such contract that 44 such covered person agrees that the decision of the arbitrator or panel 45 of arbitrators shall be final in its application to such covered person 46 and not subject to court review. 47 b. Mandatory arbitration clause null and void. The provisions of a 48 mandatory arbitration clause shall be null and void. The inclusion of 49 such clause in a written contract for any financial product or service 50 shall not serve to impair the enforceability of any other provision of 51 such contract. 52 § 2. This act shall take effect on the one hundred eightieth day after 53 it shall have become a law.