Judge Questions Validity of CU's Arbitration Clause

The PennRecord is reporting that a federal judge is allowing discovery to proceed in a putative class action litigation between FedChoice Federal Credit Union (Lanham, MD) and any members who may have been affected by an arbitration clause in the institution’s Service Agreement.

To be able use FedChoice's inter-bank service, the plaintiff had to agree to accept the Service Agreement. It was either "all or nothing."

However, Judge J. William Ditter Jr. of the U.S. District Court for the Eastern District of Pennsylvania said October 12 the Service Agreement presented by FedChoice contained an arbitration clause of “questionable validity."

The judge noted that the arbitration clause was buried on page 10 of 12 pages of online legalese.

The plaintiff, Sheila Horton, filed a class action lawsuit challenging the fees charged for overdraft protection by FedChoice. FedChoice claims that the parties in the dispute are governed by a broad, written, enforceable arbitration agreement.

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