Bill Would Help Prevent Consumers from Getting Roped Into Endless Contracts
A consumer protection measure sponsored by Assemblymen Dan Benson and Paul Moriarty has been approved by an Assembly panel, moving New Jersey one step closer to requiring notification to customers when a contract is about to be automatically renewed.
“So many highly-used services out there today include automatic renewal clauses in their contracts,” said Benson (D-Mercer/Middlesex). “In an era of paperless billing and automatic charges to credit cards or bank accounts, consumers often get perpetually roped into extended and costly contracts. By requiring these terms to be clearly displayed and advance notice before renewal, this bill will give consumers the opportunity to make more informed choices for themselves.”
This bill (A-3770) would require businesses that sell or lease any type of service under a contract to clearly inform a consumer if there is an automatic renewal provision tied to the contract and notify the consumer when the automatic renewal provision is about to be activated.
“Sometimes contracts are entered into a year, or even two years, before the automatic renewal clause kicks in,” said Moriarty. “This bill will protect consumers by ensuring that they have the opportunity to cancel any unwanted service prior to renewal of an additional term.”
Specifically, any business or individual that sells or leases (or offers to sell or lease) any service to a consumer that is tied to a contract with an automatic renewal provision must disclose the automatic renewal provision clearly and conspicuously in the contract or contract offer. This provision would apply to contracts offered for a specified period of more than one month, unless the consumer cancels that contract.
The bill also stipulates that when the service contract is for twelve months or longer, and the renewal is for a period of one month or longer, the seller must provide either written or electronic notification to the consumer not less than 30 days nor more than 60 days prior to the cancellation deadline provided in the contract.
In addition, the bill states that this notification to the consumer must disclose that unless the consumer cancels the contract, the contract will automatically renew, and indicate 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.
The bill also stipulates that if an error occurs on the part of the seller, causing them to fail to comply with the provisions of this bill, the unearned portion of the contract subject to the automatic renewal provision shall be refunded to the consumer as of the date on which the seller is notified of the error.
This act would take effect on the first day of the third month after enactment and would apply to service contracts entered into on or after that date.