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General Assembly |
File No.
8 |
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House Bill No.
5811 |
House of Representatives, March 4,
2003
The Committee on General Law reported through
REP. FOX of the 144th Dist., Chairperson of the Committee on the part of the
House, that the bill ought to pass.
AN ACT CONCERNING INTRODUCTORY
RATE OFFERS AND AUTOMATIC RENEWAL OF CONSUMER CONTRACTS.
Be it enacted by the Senate and House of
Representatives in General Assembly convened:
Section 1. Section 42-126b of the general
statutes is repealed and the following is substituted in lieu thereof
(Effective October 1, 2003) :
(a) No person, firm, partnership, association or
corporation, or agent or employee thereof, shall, in any manner, or by any
means, offer for sale goods, wares or merchandise, where the offer includes
the voluntary and unsolicited sending of goods, wares or merchandise not
actually ordered or requested by the recipient, either orally or in writing.
The receipt of any such unsolicited goods, wares or merchandise shall for all
purposes be deemed an unconditional gift to the recipient who may use or
dispose of the same in any manner [he] such recipient
sees fit without any obligation on [his] such recipient's
part to the sender.
(b) Any
person, firm, partnership, association or corporation that sells or offers to
sell any products or services pursuant to a trial offer, or at an
introductory rate that will change at the end of the introductory rate period,
shall provide the recipient of such products or services with clear and
conspicuous written notice that the recipient may cancel such products or
services upon the expiration of such trial offer or introductory rate
period. Such notice shall include the procedure for such cancellation and
shall be provided with any written promotional material for such products or
services furnished to the recipient before the start of the trial offer or
the introductory rate period or with the initial delivery of such products
or services to the recipient. Any such products or services furnished to the
recipient after the expiration of such trial offer or introductory rate
period, where such trial offer or introductory rate period is
cancelled or not otherwise renewed or continued by the recipient, shall be
deemed an unconditional gift under subsection (a) of this section. The
provisions of this subsection shall not apply to (1) any trial offer or
introductory rate offer provided by a public service company, as defined
in section 16-1, an affiliate or subsidiary of such public service company, or
any certified telecommunications provider, as defined in section 16-1, to any
consumer with whom such public service company, affiliate or subsidiary, or
certified telecommunications provider has an established and ongoing business
relationship, provided such public service company, affiliate or subsidiary,
or certified telecommunications provider shall inform such consumer of the
procedure to cancel such trial offer or to cancel after the expiration of
the introductory rate period, and (2) any transaction involving the use of
a negative option plan that is governed by 16 CFR Part 425.
(c) Any person, firm, partnership,
association or corporation that sells or offers to sell any products or
services for a specified period of time pursuant to a written contract that
contains a provision for automatic renewal of the contract at the end of the
period of time specified in the contract shall provide the recipient of such
products or services with clear and conspicuous written notice, at least
fifteen days but no later than thirty days prior to the end of the specified
period of time, that the recipient may cancel such contract. Such notice shall
include the procedure for such cancellation. If such contract is of less than
fifteen days in duration, said contract shall contain a clear and conspicuous
written notice of the right to cancel such contract and the procedure for
cancellation. If such notice is not provided to the recipient in accordance
with the provisions of this subsection, any such products or services
furnished to the recipient after the end of the period of time specified in
the contract shall be deemed an unconditional gift under subsection (a) of
this section. Nothing in this subsection shall be construed to apply to a
health club contract subject to the provisions of section 21a-219.
[(c) ] (d)
A violation of any provision of this section shall be deemed an
unfair or deceptive trade practice under subsection (a) of section 42-110b.
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This act shall take effect as follows:
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Section 1 |
October 1,
2003 |
The following fiscal impact statement and bill
analysis are prepared for the benefit of members of the General Assembly,
solely for the purpose of information, summarization, and explanation, and do
not represent the intent of the General Assembly or either House thereof for
any purpose:
OFA Fiscal
Note
State Impact:
|
Agency
Affected |
Fund-Type |
FY 04 $ |
FY 05 $ |
|
Attorney General |
GF - Potential Revenue Gain |
Greater than 100,
000 |
Greater than 100,
000 |
|
Consumer Protection, Dept. |
GF - Potential Revenue Gain |
Minimal |
Minimal |
Note: GF=General Fund
Municipal Impact:
None
Explanation
The bill establishes disclosure of cancellation procedures
pertaining to introductory rate offers and to automatic contract renewals. A
violation of the bill's provision is deemed to be a CUTPA (Connecticut Unfair
Trade Practices Act) violation.
Revenues
Since 1)
the DCP anticipates very few cases, if any, and 2) and since the DCP resolves
many of its cases through the restitution process, the revenue impact from DCP
settlement collections is anticipated to be minimal.
This bill will facilitate the Attorney General's ability
to litigate cases involving the disclosure of cancellation procedures relating
to introductory rate offers or automatic contract renewals. Depending upon the
number and nature of future violations, its passage could result in a
significant annual revenue gain to the General Fund.
The Attorney General is currently investigating several
companies that have allegedly deceived consumers into spending thousands of
dollars on unwanted home alarm services through automatic renewals of their
contracts. The bill makes it more likely that these activities would result in
consumer restitution and concurrent revenue to the state from fees and costs
related to potential future litigation.
Cost
This bill
could result in new inquiries and complaints filed with the Department of
Consumer Protection (DCP) , and the Office of the Attorney General, and could
potentially result in a workload increase which is anticipated to be minimal.
Therefore, additional resources would not be necessary for either of the two
agencies.
PA 98-109, "An Act Concerning
Trial Offers and Magazine Subscription Offers" placed similar requirements
concerning trial offers. To date, the DCP has not charged anyone under the
provisions of current law.
Further
Explanation: Connecticut Unfair Trade Practices Act (CUTPA)
Department of Consumer
Protection
As stated above, a
violation of the provisions of this bill is deemed to be an unfair trade
practice. The Department of Consumer Protection has primary jurisdiction of
CUTPA cases, and, thus, handles most of these cases administratively. Under
the Unfair Trade Practices Act, the DCP has four methods for resolving
complaints. These are as follows: 1) mediation, 2) voluntary compliance, 3)
administrative hearings, or 4) forwarding the complaint to the Attorney
General's office for litigation. Currently, the DCP handles approximately 12,
000 written complaints annually many of which contain CUTPA issues. Many cases
are resolved by granting restitution awards to the consumer. However,
depending on the specifics of the case a fiduciary agreement may be reached.
In such cases, a settlement is collected. Since the department does not track
the revenue deposited into the General Fund by type, the exact revenue gain
from this source is unknown.
Office of
the Attorney General
The Office of
the Attorney General is charged with: 1) litigating cases referred to it by
the DCP, 2) enforcing orders issued by the DCP, and 3) defending the DCP in
any administrative appeals. Resources and staff time vary depending on the
complexity of each case.
In accordance
with the Unfair Trade Practices Act, courts may award actual and punitive
damages, costs, and reasonable attorneys fees. It may also impose civil
penalties of not more than $5, 000 for each violation and $25, 000 for a
violation of a restraining order. Fees and recovered court costs related to
unfair trade practices cases are deposited in the General Fund. The amounts
deposited vary according to the nature of the case; however, they can be
significant. For example, recent cases involving misleading and deceptive
marketing as well as improper billing resulted in payment to the state ranging
from $125, 000 to $1.1 million.1 It is worthwhile to note, however, that most cases
are resolved through one of the processes mentioned above and not through the
court system.
OLR Bill Analysis
HB 5811
AN ACT CONCERNING INTRODUCTORY
RATE OFFERS AND AUTOMATIC RENEWAL OF CONSUMER CONTRACTS
SUMMARY:
This bill sets
disclosure requirements for sales made (1) at an introductory rate and (2)
under a contract including an automatic renewal clause.
A violation of the bill's requirements is deemed
to be an unfair trade practice.
EFFECTIVE DATE: October 1, 2003
OFFERS MADE AT AN INTRODUCTORY RATE
The bill requires anyone who sells or offers to
sell goods or services at an introductory rate that will change at the end of
the introductory period to provide a clear and conspicuous written notice
informing the purchaser that he can cancel at the end of the introductory
period. The notice must include the cancellation procedure and be provided
with (1) the initial delivery or (2) any written promotional material provided
before the start of the introductory period. The law already establishes the
same requirement for anyone selling pursuant to a trial offer. Goods or
services provided after the end of an introductory period that has been
cancelled are deemed to be an unconditional gift.
The bill exempts transactions involving negative
option plans governed by federal regulations. It exempts introductory rate
offers by public service companies, their affiliates and subsidiaries, and
intrastate communications providers that have an established and ongoing
relationship with a consumer, but requires these companies to inform a
purchaser of a means to cancel.
CONTRACTS WITH AUTOMATIC RENEWAL
PROVISIONS
The bill requires anyone who sells or offers to
sell goods or services for a specified time period under a written contract
that includes an automatic renewal provision to provide a clear and
conspicuous written notice stating that the purchaser can cancel the contract
at the end of the term. The notice must include the cancellation procedure and
be provided between 15 and 30 days before the scheduled end of the contract.
Any contract for a term of less than 15 days must include a clear and
conspicuous notice of the right to cancel and the cancellation procedure.
If the notice of the right to cancel an automatic
renewal contract is not provided in accordance with the bill, any goods or
services provided to the purchaser after the scheduled end of the contract are
deemed to be an unconditional gift.
The bill exempts health club contracts subject to
the law governing health club contracts from its notice of automatic renewal
provisions.
BACKGROUND
Connecticut Unfair Trade Practices Act (CUTPA)
The law prohibits businesses from engaging in
unfair and deceptive acts or practices. CUTPA allows the DCP commissioner to
issue regulations defining what constitutes an unfair trade practice,
investigate complaints, issue cease and desist orders, order restitution in
cases involving less than $5, 000, enter into consent agreements, ask the
attorney general to seek injunctive relief, and accept voluntary statements of
compliance. The act also allows individuals to bring suit. Courts may issue
restraining orders; award actual and punitive damages, costs, and reasonable
attorneys fees; and impose civil penalties of up to $5, 000 for willful
violations and $25, 000 for violation of a restraining order.
Negative Option Plans
Federal regulations require negative option
sellers to (1) clearly and conspicuously disclose the material terms of the
plan in promotional material and (2) mail announcements identifying the
merchandise in time for the subscriber to reject the selection. Failure to do
so is an unfair trade practice. Federal regulations specify the material terms
that must be disclosed and require the announcements to clearly identify the
merchandise and rejection procedure (16 CFR § 425.1) .
COMMITTEE ACTION
General Law Committee
Joint Favorable Report
TOP
1 In each of the last three fiscal years, the Attorney
General has generated in excess of $2 million in General Fund revenue from fees,
costs and
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