S T A T E O F N E W Y O R K
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8784
2017-2018 Regular Sessions
I N A S S E M B L Y
November 27, 2017
___________
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:
Section 1. The general business law is amended by adding a new section
399-c-1 to read as follows:
§ 399-C-1. MANDATORY ARBITRATION CLAUSE IN FINANCIAL PRODUCT OR
SERVICE CONTRACTS PROHIBITED. 1. DEFINITIONS.
A. THE TERM "CONSUMER" SHALL MEAN A NATURAL PERSON RESIDING IN THIS
STATE OR AN AGENT, TRUSTEE, OR REPRESENTATIVE ACTING ON BEHALF OF A
NATURAL PERSON RESIDING IN THIS STATE.
B. THE TERM "COVERED PERSON" SHALL MEAN:
(I) ANY PERSON THAT ENGAGES IN OFFERING OR PROVIDING A CONSUMER FINAN-
CIAL PRODUCT OR SERVICE; AND
(II) ANY AFFILIATE OF A PERSON DESCRIBED IN SUBPARAGRAPH (I) OF THIS
PARAGRAPH IF SUCH AFFILIATE ACTS AS A SERVICE PROVIDER TO SUCH PERSON.
C. THE TERM "FINANCIAL PRODUCT OR SERVICE" SHALL MEAN:
(I) EXTENDING CREDIT AND SERVICING LOANS, INCLUDING ACQUIRING,
PURCHASING, SELLING, BROKERING, OR OTHER EXTENSIONS OF CREDIT (OTHER
THAN SOLELY EXTENDING COMMERCIAL CREDIT TO A PERSON WHO ORIGINATES
CONSUMER CREDIT TRANSACTIONS);
(II) EXTENDING OR BROKERING LEASES OF PERSONAL OR REAL PROPERTY THAT
ARE THE FUNCTIONAL EQUIVALENT OF PURCHASE FINANCE ARRANGEMENTS, IF:
(1) THE LEASE IS ON A NON-OPERATING BASIS;
(2) THE INITIAL TERM OF THE LEASE IS AT LEAST NINETY DAYS; AND
(3) IN THE CASE OF A LEASE INVOLVING REAL PROPERTY, AT THE INCEPTION
OF THE INITIAL LEASE, THE TRANSACTION IS INTENDED TO RESULT IN OWNERSHIP
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.
LBD13717-01-7
A. 8784 2
(III) PROVIDING REAL ESTATE SETTLEMENT SERVICES, EXCEPT INSURANCE OR
PERFORMING APPRAISALS OF REAL ESTATE OR PERSONAL PROPERTY;
(IV) ENGAGING IN DEPOSIT-TAKING ACTIVITIES, TRANSMITTING OR EXCHANGING
FUNDS, OR OTHERWISE ACTING AS A CUSTODIAN OF FUNDS OR ANY FINANCIAL
INSTRUMENT FOR USE BY OR ON BEHALF OF A CONSUMER;
(V) SELLING, PROVIDING, OR ISSUING STORED VALUE OR PAYMENT INSTRU-
MENTS, EXCEPT THAT, IN THE CASE OF A SALE OF, OR TRANSACTION TO RELOAD,
STORED VALUE, ONLY IF THE SELLER EXERCISES SUBSTANTIAL CONTROL OVER THE
TERMS OR CONDITIONS OF THE STORED VALUE PROVIDED TO THE CONSUMER WHERE,
FOR PURPOSES OF THIS SUBPARAGRAPH:
(1) A SELLER SHALL NOT BE FOUND TO EXERCISE SUBSTANTIAL CONTROL OVER
THE TERMS OR CONDITIONS OF THE STORED VALUE IF THE SELLER IS NOT A PARTY
TO THE CONTRACT WITH THE CONSUMER FOR THE STORED VALUE PRODUCT, AND
ANOTHER PERSON IS PRINCIPALLY RESPONSIBLE FOR ESTABLISHING THE TERMS OR
CONDITIONS OF THE STORED VALUE; AND
(2) ADVERTISING THE NONFINANCIAL GOODS OR SERVICES OF THE SELLER ON
THE STORED VALUE CARD OR DEVICE IS NOT IN ITSELF AN EXERCISE OF SUBSTAN-
TIAL CONTROL OVER THE TERMS OR CONDITIONS;
(VI) PROVIDING CHECK CASHING, CHECK COLLECTION, OR CHECK GUARANTY
SERVICES;
(VII) PROVIDING PAYMENTS OR OTHER FINANCIAL DATA PROCESSING PRODUCTS
OR SERVICES TO A CONSUMER BY ANY TECHNOLOGICAL MEANS, INCLUDING PROCESS-
ING OR STORING FINANCIAL OR BANKING DATA FOR ANY PAYMENT INSTRUMENT, OR
THROUGH ANY PAYMENTS SYSTEMS OR NETWORK USED FOR PROCESSING PAYMENTS
DATA, INCLUDING PAYMENTS MADE THROUGH AN ONLINE BANKING SYSTEM OR MOBILE
TELECOMMUNICATIONS NETWORK, EXCEPT THAT A PERSON SHALL NOT BE DEEMED TO
BE A COVERED PERSON WITH RESPECT TO FINANCIAL DATA PROCESSING SOLELY
BECAUSE THE PERSON:
(1) IS A MERCHANT, RETAILER, OR SELLER OF ANY NONFINANCIAL GOOD OR
SERVICE WHO ENGAGES IN FINANCIAL DATA PROCESSING BY TRANSMITTING OR
STORING PAYMENTS DATA ABOUT A CONSUMER EXCLUSIVELY FOR PURPOSE OF INITI-
ATING PAYMENTS INSTRUCTIONS BY THE CONSUMER TO PAY SUCH PERSON FOR THE
PURCHASE OF, OR TO COMPLETE A COMMERCIAL TRANSACTION FOR, SUCH NONFINAN-
CIAL GOOD OR SERVICE SOLD DIRECTLY BY SUCH PERSON TO THE CONSUMER; OR
(2) PROVIDES ACCESS TO A HOST SERVER TO A PERSON FOR PURPOSES OF
ENABLING THAT PERSON TO ESTABLISH AND MAINTAIN A WEBSITE;
(VIII) PROVIDING FINANCIAL ADVISORY SERVICES (OTHER THAN SERVICES
RELATING TO SECURITIES PROVIDED BY A PERSON REGULATED UNDER ARTICLE
TWENTY-THREE-A OF THIS CHAPTER, BUT ONLY TO THE EXTENT THAT SUCH PERSON
ACTS IN A REGULATED CAPACITY) TO CONSUMERS ON INDIVIDUAL FINANCIAL
MATTERS OR RELATING TO PROPRIETARY FINANCIAL PRODUCTS OR SERVICES (OTHER
THAN BY PUBLISHING ANY BONA FIDE NEWSPAPER, NEWS MAGAZINE, OR BUSINESS
OR FINANCIAL PUBLICATION OF GENERAL AND REGULAR CIRCULATION, INCLUDING
PUBLISHING MARKET DATA, NEWS, OR DATA ANALYTICS OR INVESTMENT INFORMA-
TION OR RECOMMENDATIONS THAT ARE NOT TAILORED TO THE INDIVIDUAL NEEDS OF
A PARTICULAR CONSUMER), INCLUDING:
(1) PROVIDING CREDIT COUNSELING TO ANY CONSUMER; AND
(2) PROVIDING SERVICES TO ASSIST A CONSUMER WITH DEBT MANAGEMENT OR
DEBT SETTLEMENT, MODIFYING THE TERMS OF ANY EXTENSION OF CREDIT, OR
AVOIDING FORECLOSURE;
(IX) COLLECTING, ANALYZING, MAINTAINING, OR PROVIDING CONSUMER REPORT
INFORMATION OR OTHER ACCOUNT INFORMATION, INCLUDING INFORMATION RELATING
TO THE CREDIT HISTORY OF CONSUMERS, USED OR EXPECTED TO BE USED IN
CONNECTION WITH ANY DECISION REGARDING THE OFFERING OR PROVISION OF A
CONSUMER FINANCIAL PRODUCT OR SERVICE, EXCEPT TO THE EXTENT THAT:
(1) A PERSON:
A. 8784 3
(A) COLLECTS, ANALYZES, OR MAINTAINS INFORMATION THAT RELATES SOLELY
TO THE TRANSACTIONS BETWEEN A CONSUMER AND SUCH PERSON;
(B) PROVIDES THE INFORMATION DESCRIBED IN ITEM (A) OF THIS CLAUSE TO
AN AFFILIATE OF SUCH PERSON; OR
(C) PROVIDES INFORMATION THAT IS USED OR EXPECTED TO BE USED SOLELY IN
ANY DECISION REGARDING THE OFFERING OR PROVISION OF A PRODUCT OR SERVICE
THAT IS NOT A CONSUMER FINANCIAL PRODUCT OR SERVICE, INCLUDING A DECI-
SION FOR EMPLOYMENT, GOVERNMENT LICENSING, OR A RESIDENTIAL LEASE OR
TENANCY INVOLVING A CONSUMER; AND
(2) THE INFORMATION DESCRIBED IN ITEM (A) OF CLAUSE ONE OF THIS
SUBPARAGRAPH IS NOT USED BY SUCH PERSON OR AFFILIATE IN CONNECTION WITH
ANY DECISION REGARDING THE OFFERING OR PROVISION OF A CONSUMER FINANCIAL
PRODUCT OR SERVICE TO THE CONSUMER;
(X) COLLECTING DEBT RELATED TO ANY CONSUMER FINANCIAL PRODUCT OR
SERVICE;
(XI) SUCH OTHER FINANCIAL PRODUCT OR SERVICE AS MAY BE DEFINED BY THE
ATTORNEY GENERAL, BY REGULATION, FOR PURPOSES OF THIS SECTION, IF THE
ATTORNEY GENERAL FINDS THAT SUCH FINANCIAL PRODUCT OR SERVICE IS ENTERED
INTO OR CONDUCTED AS A SUBTERFUGE OR WITH A PURPOSE TO EVADE ANY STATE
CONSUMER FINANCIAL LAW; AND
(XII) THE TERM "FINANCIAL PRODUCT OR SERVICE" SHALL NOT INCLUDE ANY
SUCH FINANCIAL PRODUCT OR SERVICE REGULATED UNDER THE EXCLUSIVE JURIS-
DICTION OF A FEDERAL AGENCY OR AUTHORITY, OR WHERE RULES OR REGULATIONS
PROMULGATED BY THE ATTORNEY GENERAL ON SUCH FINANCIAL PRODUCT OR SERVICE
WOULD BE PREEMPTED BY FEDERAL LAW.
D. THE TERM "MANDATORY ARBITRATION CLAUSE" SHALL MEAN A TERM OR
PROVISION CONTAINED IN A WRITTEN CONTRACT FOR ANY FINANCIAL PRODUCT OR
SERVICE, AS DEFINED IN PARAGRAPH C OF SUBDIVISION ONE OF THIS SECTION,
WHICH REQUIRES THE PARTIES TO SUCH CONTRACT TO SUBMIT ANY CONTROVERSY
THEREAFTER ARISING UNDER SUCH CONTRACT TO ARBITRATION PRIOR TO THE
COMMENCEMENT OF ANY LEGAL ACTION TO ENFORCE THE PROVISIONS OF SUCH
CONTRACT AND WHICH ALSO FURTHER PROVIDES LANGUAGE TO THE EFFECT THAT THE
DECISION OF THE ARBITRATOR OR PANEL OF ARBITRATORS IN ITS APPLICATION TO
THE CONSUMER PARTY SHALL BE FINAL AND NOT SUBJECT TO COURT REVIEW.
E. THE TERM "ARBITRATION" SHALL MEAN THE USE OF A DECISION MAKING
FORUM CONDUCTED BY AN ARBITRATOR OR PANEL OF ARBITRATORS WITHIN THE
MEANING AND SUBJECT TO THE PROVISIONS OF ARTICLE SEVENTY-FIVE OF THE
CIVIL PRACTICE LAW AND RULES.
2. A. PROHIBITION. NO WRITTEN CONTRACT FOR ANY FINANCIAL PRODUCT OR
SERVICE, ENTERED INTO ON OR AFTER THE EFFECTIVE DATE OF THIS SECTION, TO
WHICH A CONSUMER IS A PARTY, SHALL CONTAIN A MANDATORY ARBITRATION
CLAUSE. NOTHING CONTAINED HEREIN SHALL BE CONSTRUED TO PROHIBIT A
COVERED PERSON FROM INCORPORATING A PROVISION WITHIN SUCH CONTRACT THAT
SUCH COVERED PERSON AGREES THAT THE DECISION OF THE ARBITRATOR OR PANEL
OF ARBITRATORS SHALL BE FINAL IN ITS APPLICATION TO SUCH COVERED PERSON
AND NOT SUBJECT TO COURT REVIEW.
B. MANDATORY ARBITRATION CLAUSE NULL AND VOID. THE PROVISIONS OF A
MANDATORY ARBITRATION CLAUSE SHALL BE NULL AND VOID. THE INCLUSION OF
SUCH CLAUSE IN A WRITTEN CONTRACT FOR ANY FINANCIAL PRODUCT OR SERVICE
SHALL NOT SERVE TO IMPAIR THE ENFORCEABILITY OF ANY OTHER PROVISION OF
SUCH CONTRACT.
§ 2. This act shall take effect on the one hundred eightieth day after
it shall have become a law.