PHILADELPHIA – A federal judge has ordered that discovery proceedings can begin in a putative class action litigation between FedChoice FCU and any members who may have been affected by an arbitration clause in the CU’s service agreement.
According to the Pennsylvania Record, Judge J. William Ditter Jr. of the U.S. District Court for the Eastern District of Pennsylvania said FedChoice’s service agreement contained an arbitration clause of “questionable validity,” and for that reason had rejected the CU’s motion to dismiss. Like most such clauses, it sought to require members to enter arbitration to resolve any disputes.
The class action suit was filed by Sheila Horton who is challenging the credit union’s fees for overdraft protection. The Pennsylvania record reported Horton opened her original checking account with a credit union prior to FedChoice on Feb. 13, 1986, and then on Sept. 21, 2015, Horton “may have signed up for an online service which permitted FedChoice members to make electronic transfers between their FedChoice accounts and accounts in other financial institutions.”
Horton is contending that she did not agree to the service agreement, and that even if she did agree, the arbitration clause was limited to “disputes about inter-bank transfers of funds,” according to the Pennsylvania Record.
The credit union told the court Horton agreed to the terms of the service agreement when it was presented online, and would not have been able to proceed with using the service had she not clicked on “agree.”
The judge said that when the service agreement appeared in a pop-up window, the arbitration clause appeared on page 10 of a 12-page agreement, according to the Pennsylvania Record.
“Without question, the Service Agreement is a contract of adhesion. FedChoice has set the terms and conditions. Ms. Horton could either accept those terms or be denied FedChoice’s inter-bank transfer service. She had no bargaining power. The contract was all or nothing,” the Pennsylvania Record quoted Judge Ditter as saying.