HB405 By Representative Wood RFD State Government Rd 1 14-MAR-17

SYNOPSIS: Existing law does not regulate the use of automatic renewal provisions in service contracts.

This bill would provide for notice of automatic renewal provisions in service contracts.

This bill would provide for notice to a consumer prior to the automatic renewal of a service contract.

This bill would provide for exemptions.

This bill would provide that failure to provide notice shall render the automatic renewal provision of a contract void and unenforceable.

A BILL TO BE ENTITLED AN ACT

Relating to service contracts; to provide for notice of automatic renewal provisions in service contracts; to provide for notice to a consumer prior to the automatic renewal of a service contract; to provide for exemptions; and to provide that failure to provide notice shall render the automatic renewal provision of a contract void and unenforceable.

BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:

Section 1. (a) As used in this section, the following terms shall have the following meanings, respectively, unless the context clearly indicates otherwise:

(1) AUTOMATIC RENEWAL PROVISION. A provision under which a service contract is renewed for a specified period of more than one month if the renewal causes the service contract to be in effect more than six months after the day of the initiation of the service contract. The renewal is effective unless the consumer gives notice to the seller of the consumer's intention to terminate the service contract.

(2) CONSUMER. A natural person or a nonprofit organization exempt from taxation under Section 501(c)(3) of the Internal Revenue Code of 1986 receiving service, maintenance, or repair benefits under a service contract. The term does not include a natural person engaged in business or employed by or otherwise acting on behalf of a governmental entity if the person enters into the service contract as part of or ancillary to the person's business activities or on behalf of the business or governmental entity.

(3) SELLER. A person, firm, partnership, association, or corporation engaged in commerce that sells, leases, or offers to sell or lease any service to a consumer pursuant to a service contract.

(4) SERVICE CONTRACT. A written contract for the performance of services for a specified period of time.

(b) Any seller that sells, leases, or offers to sell or lease any service to a consumer pursuant to a service contract that has an automatic renewal provision shall disclose the automatic renewal provision clearly and conspicuously in not less than 14-point bold type in the contract or contract offer.

(c) Any seller that sells, leases, or offers to sell or lease any service to a consumer pursuant to a service contract for a specified period of 12 months or more and that automatically renews for a specified period of more than one month, unless the consumer cancels the contract, shall provide the consumer with written or electronic notification of the automatic renewal provision. The notification shall be provided to the consumer no less than 30 days or no more than 60 days before the cancellation deadline pursuant to the automatic renewal provision. The notification shall disclose clearly and conspicuously:

(1) That unless the consumer cancels the contract, the contract shall automatically renew.

(2) The methods by which the consumer may obtain details of the automatic renewal provision and cancellation procedure, including contacting the seller at a specified telephone number or address, referring to the contract, or any other method.

(d) This section shall not apply to any of the following:

(1) A financial institution as defined in subdivision (1) of Section 40-16-3, Code of Alabama 1975, or any depository institution as defined in 12 U.S.C. §1813(c)(2).

(2) A foreign bank maintaining a branch or agency licensed under the laws of any state of the United States.

(3) Any subsidiary or affiliate of an entity provided in subdivision (1) or (2) of this subsection.

(4) Any utility as provided in Chapter 5, 6, or 7 of Title 37, Code of Alabama 1975.

(5) Any entity regulated pursuant to Chapter 28 of Title 2, Code of Alabama 1975.

(6) Any county, municipal corporation, authority, or local government or governing body.

(e) A violation of this section renders the automatic renewal provision of a contract void and unenforceable.

Section 2. This act shall become effective on the first day of the third month following its passage and approval by the Governor, or its otherwise becoming law.

Contracts

Consumers

Automatic Renewals

Service Contracts