ASSEMBLY, No. 1585

STATE OF NEW JERSEY

215th LEGISLATURE

 

PRE-FILED FOR INTRODUCTION IN THE 2012 SESSION

 


 

Sponsored by:

Assemblyman  DANIEL R. BENSON

District 14 (Mercer and Middlesex)

Assemblyman  PAUL D. MORIARTY

District 4 (Camden and Gloucester)

 

Co-Sponsored by:

Assemblyman Coughlin

 

 

 

 

SYNOPSIS

     Prohibits automatic renewal of service contracts.

 

CURRENT VERSION OF TEXT

     Introduced Pending Technical Review by Legislative Counsel

  


An Act concerning service contracts and supplementing P.L.1960, c.39 (C.56:8-1 et seq.).

 

     Be It Enacted by the Senate and General Assembly of the State of New Jersey:

 

     1.    As used in this act:

     “Automatic renewal provision” means a provision under which a service contract is renewed for a specified period of more than one month if: (1) the renewal causes the service contract to be in effect more than six months after the day of the initiation of the service contract; and (2) the renewal is effective unless the consumer gives notice to the seller of the consumer’s intention to terminate the service contract.

     “Consumer” means a natural person who buys other than for purposes of trade any tangible personal property that is distributed in commerce and that is normally used for personal, family, or household purposes and not for business or research purposes.

     “Seller” means any natural person, firm, partnership, company, corporation, association, or other similar legal entity engaged in commerce that sells, leases, or offers to sell or lease any service to a customer pursuant to a service contract.

     “Service contract” means a written contract for the performance of service, maintenance, or repair over a fixed period of time or for a specified duration in connection with any real property or that provides a benefit to any real property.

     "Warranty" means a warranty made solely by the manufacturer, importer, or seller of property or services without consideration, that is incidental to, and not negotiated or separated from, the sale of the property or services, that guarantees indemnity for defective materials, parts, mechanical or electrical breakdown, labor, or workmanship, or provides other remedial measures, including repair or replacement of the property or repetition of services.

 

     2.    a.  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 the contract or contract offer.

     b.    Any seller that sells or offers to sell any service to a consumer pursuant to a service contract the term of which is 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.  Notification shall be provided to the consumer not less than 30 days nor more than 60 days before the cancellation deadline pursuant to the automatic renewal provision.  This notification shall disclose clearly and conspicuously:

     (1)   That unless the consumer cancels the contract the contract will automatically renew; and

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

     c.     As part of the seller’s routine business practice, where an error has caused the failure to comply with the provisions of this section, the unearned portion of the contract subject to the automatic renewal provision shall be refunded as of the date on which the seller is notified of the error.

     d.    The seller shall provide written notification to the consumer not less than 30 days nor more than 60 days before any change in the procedures required of the consumer to cancel the automatic renewal provision.

 

     3.    The following shall be exempt from the provisions of this act:

     a.     warranties;

     b.    service contracts on tangible property if the tangible property for which the service contract is sold has a purchase price of $250 or less, excluding sales tax;

     c.     service contracts with a bank, trust company, savings bank, savings and loan association, credit union, insurance company, or health maintenance organization organized under the laws of any state or the United States; and

     d.    service contracts issued, offered, or sold:

     (1)   by a public utility to the extent that the public utility is regulated by the Board of Public Utilities, or by a person providing central heating and air conditioning services; or

     (2)   to any person other than a consumer.

 

     4.    a.  This act shall not limit rights or remedies available to a consumer under any other law.

     b.    If a seller does not comply with the provisions of this act, the automatic renewal provision shall be void and unenforceable.

 

     5.    A violation of any of the provisions of this act shall be an unlawful practice and a violation of P.L.1960, c.39 (C.56:8-1 et seq.).

 

     6.    This act shall take effect on the first day of the third month following enactment, and shall apply to service contracts entered into on or after that date.


STATEMENT

 

     This bill establishes notification standards regarding service contracts which contain automatic renewal provisions.  A service contract is defined in the bill as a written contract for the performance of service, maintenance, or repair over a fixed period of time in connection with real property.  A service contract does not include a warranty offered by a manufacturer, importer, or seller of property or services that is incidental to the sale of the property or service.  The bill’s provisions do not apply to service contracts on real property valued under $250, and those offered by certain financial institutions, public utilities regulated by the Board of Public Utilities, and persons providing central heating and air conditioning services.

     Specifically, the bill provides that if a service contract has an automatic renewal provision for a specified period of more than one month, the seller shall disclose the automatic renewal provision clearly and conspicuously in the contract or contract offer.  Additionally, if the service contract is for twelve months or longer, and the renewal is for a period of one month or longer, the seller shall provide either written or electronic notification to the consumer between 30 and 60 days prior to the cancellation deadline provided in the contract.  This notification shall disclose that unless the consumer cancels the contract it will automatically renew and indicate methods by which the consumer may obtain details of the automatic renewal provision and cancellation procedure.

     The bill also requires the seller to notify the consumer of any change in the procedures required to cancel the automatic renewal. 

     The bill provides that if an error has caused the seller to fail to comply with the provisions of the bill, the unearned portion of the contract subject to the automatic renewal provision shall be refunded as of the date on which the seller is notified of the error. 

     The bill makes automatic renewal provisions void and unenforceable if the notification requirements stipulated in the bill are not met.  Furthermore, a violation of the bill’s provisions constitutes an unlawful practice.  An unlawful practice under the Consumer Fraud Act is punishable by a monetary penalty of not more than $10,000 for a first offense and not more than $20,000 for any subsequent offense.  In addition, a violation can result in cease and desist orders issued by the Attorney General, the assessment of punitive damages, and the awarding of treble damages and costs to the injured.