A02656 Summary:

Add §399-c-1, Gen Bus L
Relates to prohibiting mandatory arbitration clauses in financial product or service contracts.
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A02656 Actions:

01/24/2019referred to consumer affairs and protection
01/08/2020referred to consumer affairs and protection
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A02656 Committee Votes:

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A02656 Floor Votes:

There are no votes for this bill in this legislative session.
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A02656 Memo:

submitted in accordance with Assembly Rule III, Sec 1(f)
  TITLE OF BILL: An act to amend the general business law, in relation to prohibiting mandatory arbitration clauses in financial product or service contracts   PURPOSE OR GENERAL IDEA OF BILL: To ensure New York Consumers have appropriate protections when banking in New York State.   JUSTIFICATION: This legislation safeguards New Yorkers rights by prohibiting mandatory arbitration chases in contracts for financial services and products. This is an important bill that protects a consumer's right to sue. Under this legislation consumers will still have the option to use arbi- tration, but it woul r t be forced on them as their only option.   PRIOR LEGISLATIVE HISTORY: A8784 Lentol No Same as 2017-2018   EFFECTIVE DATE: This act shall take effon the one hundred eightieth day after it shall have become law.
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A02656 Text:

                STATE OF NEW YORK
                               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
          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.

        A. 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.
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A02656 LFIN:

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A02656 Chamber Video/Transcript:

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