PROPOSED RULE
CONCERNING AUTOMATIC RENEWAL PROVISIONS IN SERVICE CONTRACTS
TITLE 12. TRADE, COMMERCE, AND BANKING
CHAPTER 2. CONSUMER PROTECTION
PART ?? Requirements for Automatic Renewal of Service Contracts
12.2.??.1 ISSUING AGENCY: Office of the New Mexico Attorney General.
12.2.??.2 SCOPE: These rules and regulations shall apply to all persons, as defined in NMSA 1978, § 57-12-2C (1967), engaging in business transactions in New Mexico. These rules and regulations are not intended to preempt other rules and regulations, or statutes which exist or subsequently are promulgated and give greater requirements.
12.2.??.3 STATUTORY AUTHORITY: The New Mexico Attorney General hereby promulgates these rules and regulations affecting NMSA 1978, Section 57-12-2(D) (1971) of the New Mexico Unfair Practices Act, NMSA 1978, Section 57-12-1 et seq. (1967), pursuant to the authority to enact regulations conferred by the Act, NMSA 1978, Section 57- 12-13.
12.2.??.4 DURATION: Permanent.
12.2.??.5 EFFECTIVE DATE: [ 2009].
12.2.??.6 PREFACE: The New Mexico Attorney General has received numerous complaints filed by consumers of the State of New Mexico concerning unfair or deceptive practices regarding automatic renewal provisions of consumer contracts or service contracts. The automatic renewal disclosure and cancellation provisions are material terms and conditions of a contract. Contracts with automatic renewal provisions are common in health clubs, satellite TV, wireless communication, and home alarm systems. It is not uncommon for any change in service, product or features to trigger an automatic renewal of the contract without any notice to the consumer of the extension of the contract term. These contracts often do no include adequate notice to the consumer prior to the automatic renewal of the contract term. The procedures to cancel are often unreasonable, difficult to satisfy or extremely limited to the detriment of the consumer. Consequently, consumers are often faced with automatic extensions of contracts without a reasonable opportunity or notice to effectuate a timely cancellation.
12.2.???.7 OBJECTIVE: The purpose of these rules and regulations is to describe certain practices which occur in consumer or service contracts which are unfair or deceptive trade practices in the broader meaning under the Unfair Practices Act, NMSA 1978, 57-12-2 (D), or which specifically constitutes a violation of the unfair Practices Act, NMSA 1978, 57-12-1 et seq.
12.2.???.8 DEFINITIONS: Unless defined herein, all words should be given their customary and ordinary meanings.
A. “Automatic renewal provision” means a provision under which a service contract is renewed for a specified period if:
(i) the renewal causes the service contract to continue in effect more than two months after the end of the term of the original contract; and,
(ii) the renewal is effective unless the consumer gives notice to the seller of the consumer’s intention to terminate the service contract.
B. “Seller” means a person providing service, maintenance, or repair under a service contract.
C. “Service contract” means any contract for service, maintenance or repair.
12.2.??.9 AUTOMATIC CANCELLATION PROVISIONS:
A. It is an unfair or deceptive trade practice for any consumer service contract to contain an automatic renewal provision unless the contract provision is set forth in a clear and conspicuous manner in at least 10 point type and includes the notice requirements and specific procedure by which the consumer may cancel the contract at the end of the initial contract term and the terms of the automatic renewal in the event that notice of cancellation is not given at the end of the initial contract term;
B. It is an unfair or deceptive trade practice for any consumer service contract to contain an automatic renewal provision unless the seller provides the consumer written notice prior to the end of the initial term of the contract or prior to the end of any renewal term of the contract consistent with Subsection (C) herein;
C. It is an unfair and deceptive trade practice for any service contract that contains an automatic renewal provision to:
1. Fail to provide written notice to the consumer specifying the procedure by which the consumer may cancel the contract and set forth in a clear and conspicuous manner, in at least 10 point type, and served on the consumer either by certified mail or on the first page of a monthly statement at least 30 days before the last day on which the consumer may give notice of the consumer’s intention to terminate the contract, but not sooner than 60 days before the last day on which the consumer may give notice;
2. Fail to allow a minimum of thirty (30) calendar days after the receipt of the seller’s notice pursuant to (C)(1) for the consumer to give notice of the consumer’s intent to terminate the contract at the end of the initial term or at the end of any additional renewal term;
3. Fail to honor a written notice sent via fax, U.S. mail, email or any other means upon which a consumer can reasonably rely to deliver such notice and postmarked, time stamped or otherwise electronically date stamped within the 30 calendar days provided for the consumer to give notice;
4. Fail to honor a written notice timely sent, mailed, emailed or otherwise transmitted in a manner upon which the consumer can reasonably rely to deliver such notice but received by the seller after the expiration of the notice period;
5. Fail to allow termination of the contract at the end of the initial term or at the end of any additional renewal term without additional cost or penalty;
12.2.??.13 SEVERABILITY: If any portion of this rule is held invalid, the remainder of the rule and application thereof shall remain unaffected.
12.2.??.14 LIBERAL CONSTRUCTION: These rules and regulations shall be liberally construed to carry out the remeadial purposes of the Unfair Practices Act. NMSA 1978, 57-12-1 et seq. It is not the intention of the Attorney General to have these rules and regulations preclude either a judge or jury from finding, where appropriate, that there has been fraud, misrepresentation, negligent misrepresentation, mutual mistake, or failure to disclose a material fact.
By my order, this rule concerning automatic renewal provisions is hereby proposed to be adopted as drafted herein.
Proposed rule ___________________
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Gary K. King
New Mexico Attorney General