The state of Florida passed a new bill affecting automatic renewal of contracts. Under House Bill 751, titled, An act relating to automatic renewal of service contracts, service providers must include a clear and conspicuous clause in the contract specifying the terms of the automatic renewal, as well as give notice â€” between 30 and 60 days prior â€” that the contract will self-renew.
This statute was signed by Florida governor, Charlie Crist, on May 12, 2010 and will affect all contracts entered into on or after July 1, 2010. As Ken Kirschenbaum of Kirschenbaum & Kirschenbaum, P.C., Garden City, N.Y., points out in a recent newsletter, the bill exempts business subscribers, but also all renewals of up to one month, which he suggests sellers should consider as a safe bet in light of similar statutes passed and likely to pass across the United States.
At least 10 other states have passed or amended similar legislation in the past four years and ESA director of government relations, John Chwat says we will see many more follow suit. “I’m following about 23 to 24 [proposed bills] at the moment. Some have not passed this session but some are still active.” With all 50 state legislatures meeting in 2011, Chwat predicts those 23 or 24 bills could grow significantly. “It’s a big and popular issue in consumer protection at the state legislature level. And we haven’t seen the end of it.”
In addition to Florida, states with similar, enacted, automatic renewal legislation include Arkansas, Connecticut, Illinois, New Mexico, North Carolina, New York, Pennsylvania, Tennessee and Utah.
Of those states looking to pass anti-automatic renewal statutes, Tennessee, which currently has legislation stating automatic renewal on residential alarm contracts is permitted up to one year, is notable for drafting bills specifically targeting alarm system contractors. Senate Bill 1476 and House Bill 0786, which were opposed this session, would disallow automatic renewal clauses altogether, as well as impose other requirements on alarm system contracts.
Bob Worthy, who as Legislative Committee chairman for the Alarm Association of Florida worked very closely with the new Florida statute, saw it develop from a potentially challenging legislative proposition to a manageable regulation. “It all boils down to education; a lot of states don’t have strong alarm associations to warn legislators as to possible pitfalls,” Worthy said. “We came out probably better off than a lot of states that passed bills with no industry representation.”
Last year, the California Alarm Association (CAA) was able to secure an exemption from Senate Bill 340, which requires a conspicuous clause and specific approval from the subscriber on automatic renewal bids. According to an ESA press release, the CAA argued that the alarm industry is already regulated by Alarm Act statutes and the Department of Consumer Affairs via the Bureau of Security and Investigative Services. CAA also proposed that the alarm industry requires special consideration as automatic renewal of contracts ensures subscribers’ “safety and well-being.”
“This is a significant victory because the legislature has now recognized that there are unique circumstances regarding alarm contracts and we will be able to cite the exemption in future legislative debates in other states,” reads the release.
On the other side of the legislative coin, New York Senate Bill 7230, which would amend a previous law requiring notice of automatic renewal by certified mail, was referred to the Judiciary Committee March 24, 2010. The bill is particular to electronic and life safety alarm services and says that payment by a subscriber after a contract has expired acknowledges the extension of that contract and fulfills the notice requirements of the law already in place. This bill, as well as the California exemption, is the result of very active lobbying, according to Chwat.
“This fall, everyone should be aware of these types of bills coming down the pipe,” Chwat advises. “If they’re not going to take a proactive stance like New York has, states should seek to get exemption like California.”
Bob Ireland, president of the Alarm Association of Florida, advises, “All sides need to work together keeping an open mind about new legislation.” He stresses that whatever the law, “Every company should make it very clear to their client what the terms and conditions of the contract are â€” including what the renewal clause is.” ESA and Kirschenbaum agreed, in their respective literature, that maintaining open communication with consumers is key in avoiding negative repercussions from these statutes.
For information on automatic renewal statutes state by state, visit http://www.kirschenbaumesq.com/autorenewal.htm
Florida Passes Automatic Renewal Statute, Other States to Follow
June 10, 2010