BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 1428|
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THIRD READING
Bill No: SB 1428
Author: Hernandez (D)
Introduced:5/10/16
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.
ANALYSIS:
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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Page 2
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
Commission;
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
agreement.
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
unnecessary."
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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