BILL ANALYSIS                                                                                                                                                                                                    

          |SENATE RULES COMMITTEE            |                       SB 1428|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
          |327-4478                          |                              |

                                   THIRD READING 

          Bill No:  SB 1428
          Author:   Hernandez (D) 
          Vote:     21 

           SENATE JUDICIARY COMMITTEE:  4-2, 5/3/16
           AYES:  Jackson, Leno, Monning, Wieckowski
           NOES:  Moorlach, Anderson
           NO VOTE RECORDED:  Hertzberg

           SUBJECT:   Online contracts

          SOURCE:    Author

          DIGEST:  This bill requires that businesses offering automatic  
          renewal or continuous service offers provide an email address or  
          option on their Internet Web Site for the purpose of  
          communicating the consumer's decision to not renew the contract  
          or service. 


          Existing law: 

          1)Establishes requirements governing automatic purchase renewals  
            and states the Legislature's intent to end the practice of  
            ongoing charging of consumer accounts without the consumer's  
            explicit consent.  (Bus. & Prof. Code Sec. 17600 et seq.)


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          2)Prohibits a business making an automatic renewal or continuous  
            service offer from doing any of the following:

                 failing to present the terms in a clear and conspicuous  
               manner before the subscription or purchasing agreement is  
               fulfilled, as specified;
                 charging the consumer's credit or debit card or the  
               consumer's account with a third party for an automatic  
               renewal or continuous service without first obtaining the  
               consumer's affirmative consent; and
                 failing to provide an acknowledgment that includes the  
               automatic renewal or continuous service offer terms,  
               cancellation policy, and information regarding how to  
               cancel, as specified. (Bus. & Prof. Code Sec. 17602(a).)

          1)Requires a business making an automatic renewal or continuous  
            service offer to provide a toll-free telephone number,  
            electronic mail address, or other cost-effective, timely, and  
            easy-to-use mechanism for cancellation, as specified. (Bus. &  
            Prof. Code Sec. 17602(a).)

          2)Exempts certain services and businesses from the above  
            provisions, including: 

                 a business or affiliate that is regulated by the  
               California Public Utility Commission, the Federal  
               Communications Commission, or the Federal Energy Regulatory  
                 an entity regulated by the Department of Insurance;
                 alarm company operators; 
                 licensed banks and bank holding companies; and
                 service contract sellers and service contract  
               administrators regulated by the Bureau of Electronic and  
               Appliance Repair. 

          1)Provides for the modification and cancellation of contracts.  
            (Civ. Code Sec. 1697 et seq.)


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          This bill: 

          1)Requires that businesses making automatic renewal or  
            continuous service offers shall provide an electronic mail  
            address or option on their Internet Web site for the purpose  
            of a consumer to communicate to the business his or her  
            decision to not renew the subscription or purchasing  

          2)Requires the business to, within 24 hours, notify the consumer  
            of receipt of the communication, and requires that the  
            business honor the consumer's decision to not renew the  
            contract or service. 

          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:NoLocal:    No

          SUPPORT:   (Verified5/11/16)

          None received

          OPPOSITION:   (Verified5/11/16)

          California Chamber of Commerce
          Direct Marketing Association

          ARGUMENTS IN SUPPORT:     The author writes:

              Current law establishes that companies must provide a toll  
              free number, email, or other "easy method" to cancel  
              contracts. [?] There have been numerous news stories that  
              reference customers who must spend hours on the phone with  
              customer service agents just to simply cancel service. While  
              these are egregious examples, even spending short amounts of  
              time having to navigate the system of customer service can  


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              be burdensome to someone who is solely looking to cancel.  
              This bill seeks to address this problem by providing an  
              online cancellation method, which will be good for consumers  
              and potentially allow companies to provide better customer  
              support by alleviating some call volume.

              The bill seeks to allow consumers a means to cancel services  
              online. Currently, it targets automatic renewal contracts  
              and states that if allowed to sign up online, then a similar  
              means of cancellation should be provided to consumers.

          ARGUMENTS IN OPPOSITION:     A coalition, in opposition to the  
          prior version of this bill, wrote, "Clearly, direct contact with  
          retailers or service providers - whether in person or through a  
          phone call - prior to cancellation may be helpful to consumers,  
          not harmful.  If companies or service providers are not clear or  
          are combative - as in the case of the few notorious examples -  
          there is ample law already to set them straight, making SB 1428  

          That coalition removed its opposition with the adoption of the  
          amendments taken in the Senate Judiciary Committee, with the  
          exception of the Direct Marketing Association and the California  
          Chamber of Commerce, which both remain opposed. 

          Prepared by:Nichole Rapier / JUD. / (916) 651-4113
          5/11/16 15:12:49

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