Security Systems News reported on a Penn alarm company who was fined by thePenn State Attorney General's office for using improper contracts and salestechniques. Below I have included a comment from another alarm co on theissue.

 

According to the article the Penn alarm co was using contracts withautomatic renewal provision without any form of notice [Penn doesn't have astatute covering auto renewal], type size that was too small and languagethat was not "plain language". The alarm co was also apparently targetingelderly consumers and taking advantage of them. Two complaints to the AGended up with a major investigation. Of course investigations like thishurt the entire alarm industry and has a tendency to spread.

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The alarm company owner [according to the article] claims that he settledwith the AG rather than incur legal fees. That may have been a wisedecision, but doesn't explain how he got into the fix he found himself into begin with, and why he allowed to complaints to the AG to escalate to afull scale investigation.

According to the article the alarm co owner thought his contract was thesame as everyone else's, including some of the nationwide companies. Healso claims he has been using the same contract form for 11 years. Thatalone should be a warning. Those of you on this list are updated with newcontract ideas regularly and urged to update your contracts yearly.An attorney quoted in the article stated that Penn doesn't have a contractrenewal law, and that he knew of only one state that did, New York. Ofcourse that is not correct. There are at least 4 states with renewalstatutes posted on my web site [Alarm Law issues page].Besides the automatic renewal provision, which I have addressed in manyarticles, the alarm co was in trouble for using small print size andlanguage that the AG didn't think was "plain language".

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You should try and use at least 9 point type in your contracts, even ifyour state doesn't have minimum type size requirements. Also be carefulwith the back side of the contracts. Your subscribers need to be able toread that too.

As far as plain language, I try and write so that what I am writing iseasily understood. You will probably find that many jurisdictions will usethe standard of the "least sophisticated consumer", and you might besurprised how unsophisticated Judges and Attorney Generals think consumersare. One thing is for sure, if you can't understand your contract termsdon't expect your subscribers to understand them. And I just can't helpmentioning that I recently had occasion to review a contract where the textspent so much room with "he, she, him, her, they, us, you, them, agents,representatives, heirs, executors, etc, [until you wanted to throw up orgive up reading], so that the print size had to be too small to fix thatcrap in. That language was in Most paragraphs, not just one or two. If yousee that in your contract then you probably can't fit the important stuffin. Update !!

As far as AG and consumer investigations go, it is important to addressthem immediately. It is unfortunate that this matter with the Penn alarm coeven made the news; it should have been dealt with before it reached thatlevel.If you find yourself the target of investigation you should engage counselfamiliar with the alarm industry immediately, and that attorney should bedoing whatever he, she, they, them, their attorney staff and non attorneystaff can do to resolve the issue quickly and quietly.

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Here is comment from another alarm co on the issue:This alarm company had to pay $13,000.00 in fines! According to the newsarticle it violated the Pa. Do not call list, targeted elderly, disabledand veterans with phony discounts and deceitful sales pitches! These arethe words of the State Attorney Generals office, not mine! I think that itis a shame that they offered him a settlement and forced him to makerestitution to clients he defrauded without shutting him down! A prisonterm and the closing of his business would be a more fitting punishment andwarning to those who make a business out of deliberate fraud!

Greg S
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I'm with Greg S. Closing of business...prison term....whatever. Somethingthat vindicates our industry. The main theme in all these responses is tolearn how to do this right! Or find something else. Not everyone deservesto be 'in business'.It doesn't serve anyone; customers, industry, employees...... to be sorry.

Zeke Lay

ComtecOklahoma
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Ken,

your article from November 05 is an industry secret.You are right to be hesitant to try and explain it to the contract-mindedin the business. When they 'close the plant' or when things happen thateffect the economy in a larger way than we might want to anticipate.....contractual obligations won't be worth the paper on which they are written.I'm not talking doom and gloom, but I am saying you can't get blood from aturnip, and you can't even get your case heard if there are thousands inline......There are lots more people that can afford your 'retail' price (which isjust paying for something when you get it...) if you'll just ask, and theseare the type of customers that will still be there when the times turnbad......Quality or quantity.... that's probably always been a major decision. Abunch of contracts with people living on the edge of their credit? Or a fewwith stable incomes?The problem tends to be..... the former is a sales issue; how many feet canyou put on the street? And the latter is a quality-of-product and long termcommitment to service/reputation issue.

Zeke Lay

ComtecOklahoma

P.S. I didn't write the letter in question below (although JR seems to bemy kind of alarm owner), but I would like to hear the person that spelled"Jask Ass" explain the value of a contract and how to get them signed.
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The Nov article referred to was suggestion that alarm companies shouldconsider offering month to month contracts [where there is recurringrevenue] to subscribers who pay a fair consideration for the installation.The concept is that the subscriber pays the installation, about 36 monthsin advance, and will more than likely remain a subscriber, so the month tomonth should not be problem [though on sale of the contract it might fetchless multiple].
Deceptive business practices is sometimes defined by statute, but oftendepends on the sensibility of consumer affairs and attorney generalemployees. Like the Supreme Court of the United States said aboutpornography, it's not easily defined but we know it when we see it.The public needs security services and there is no reason to run afoul ofdeceptive business practices.