BILL NUMBER: SB 916 AMENDED
BILL TEXT
AMENDED IN SENATE MAY 15, 2001
INTRODUCED BY Senator Ackerman
FEBRUARY 23, 2001
An act to amend Section 1812.101 of the Civil Code, relating to
discount buying organizations.
LEGISLATIVE COUNSEL'S DIGEST
SB 916, as amended, Ackerman. Discount buying organizations.
Existing law regulates membership contracts for discount buying
organizations, as defined. Certain discount buying organizations are
exempted from these provisions, including organizations that provide
a full refund of membership fees, as specified, maintain a bond of
$20,000, and comply with certain other requirements.
This bill would additionally exclude certain discount buying
organizations limiting refunds to members who were charged
with goods or services without authorization or who did not receive
promised services, that maintain a bond of $50,000,
from these provisions if they establish, maintain, and file with the
Secretary of State specified information regarding an escrow account
in the amount of $50,000 used to provide members with membership fee
refunds, and that comply with other
specified requirements , from the above-described provisions
of law .
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 1812.101 of the Civil Code is amended to read:
1812.101. For the purpose of this title, the following
definitions shall be used:
(a) "Discount buying organization" means any person or persons,
corporation, unincorporated association, or other organization which,
for a consideration, provides or purports to provide its clients or
the clients or members of any other discount buying organization with
the ability to purchase goods or services at discount prices, except
that such an organization shall a discount
buying organization does not include: (1) any
include any of the following:
(1) Any discount buying organization in which the total
consideration paid by each client or member in any manner whatsoever
for the purchase of discount buying services from the organization
(A) does that either:
(A) Does not exceed a one-time fee of fifty dollars ($50) or
an annual fee of twenty-five dollars ($25) to be paid on a yearly
basis, or (B) does basis.
(B) Does not exceed a one-time or annual fee of fifty
dollars ($50) and the organization provides a majority of the goods
and services through purchases by members who walk in to a fixed
location operated by the organization; (2) any
organization.
(2) Any discount buying organization in which the total
consideration paid by each client or member in any manner whatsoever
for the purchase of discount buying services from the organization
does not exceed a one-time or annual fee of one hundred dollars
($100) and the organization (A) offers does
all of the following:
(A) Offers buying services to clients or members through
toll-free telephone access, computer access, or video shopping
terminals; (B) (i) during terminals.
(B) (i) During the first year of membership of each member,
upon the request of the member, provides a full refund of membership
fees, exclusive of any fees, however designated, not exceeding ten
dollars ($10) in the aggregate, without conditions other than the
surrender of materials which allow the member to access or use the
service, or (ii) if a publicly traded corporation, limits
refunds to those members who were charged for goods or services
without authorization or did not receive the services promised with
membership, and maintains a procedure for the submission of a
disputed refund to an independent third-party arbitrator and assumes
all parties' arbitration costs; (C) provides service.
(ii) (I) In the case of a corporation described in paragraph (16)
of subdivision (e) of Section 17511.1 of the Business and Professions
Code, the organization shall establish an escrow account of fifty
thousand dollars ($50,000) for the purpose of providing refunds to
members, pursuant to clause (i). If at any time during the first
year of the existence of the escrow account the fifty thousand
dollars ($50,000) is depleted, the corporation shall within 30 days
replenish the account in the amount of fifty thousand dollars
($50,000). For each calendar year thereafter, the corporation shall
deposit in the account an amount equal to refunds made from the
account in the prior calendar year, but not less than fifty thousand
dollars ($50,000). The corporation shall provide proof of the
establishment of the escrow account to the Secretary of State and
shall maintain records of all member requests for refunds and refunds
made pursuant to this subparagraph. The records shall be made
available for review upon request by the Attorney General, any
district attorney, or the Department of Justice.
(II) The escrow account shall be established and maintained at a
federally insured bank or financial institution independent of the
corporation with escrow instructions making the financial institution
or an officer or employee thereof the escrow trustee.
(III) Refunds shall be made from the escrow account to any member
who provides proof of membership while a California resident and
requests, in writing, a membership refund, and has not previously
been refunded their membership fee. Requests for refunds may be made
directly to the corporation, but refunds may not be made from the
escrow account unless the refund request is made to the escrow
trustee.
(IV) Proof of creation of the escrow account, and membership
refund information, shall be provided to the Secretary of State in
the following form:
"The ____ (organization) has established an escrow account for the
refund of membership fees at ____ (financial institution). Refunds
from the escrow account may, in addition to other remedies and
sources available to you, be obtained by mailing a written request
along with proof of membership to ____ (escrow trustee)." This
refund request shall not affect or limit any other remedy at law
available to you."
(C) Provides at least 15 toll-free service lines to
California customers devoted exclusively to customer service
questions and complaints; and (D) maintains
complaints.
(D) Maintains a bond which meets the requirements of
Sections 1812.103 and 1812.104, except that the principal sum of the
bond need only be twenty thousand dollars ($20,000) or, in
the case of a corporation described in clause (ii) of subparagraph
(B), fifty thousand dollars ($50,000); or (3) any
($20,000).
(E) (i) Provides the Attorney General, to the Attorney General's
satisfaction, documents that clearly explain membership fee
cancellation and refund terms which include:
(I) The amount of the initial membership fee and how and when it
will be collected.
(II) If applicable, that a customer need not be provided billing
information in order to be charged a membership fee.
(III) In the case of trial membership offers, the duration of the
trial period and that if the customer does not cancel within the
trial period he or she will automatically be charged the membership
fee.
(IV) Specifically how the customer may cancel membership.
(ii) If an organization provides documentation that clearly
explains membership fee cancellation and refund terms, which include
information required by clauses (i) to (iv), inclusive, of
subparagraph (E), to obtain this exemption, the organization need not
comply with Section 1584.5, 1812.106, or 1812.107.
(3) Any discount buying organization in which persons
receive discount buying services incidentally as part of a package of
services provided to or available to the individual on account of
his or her membership in the organization, which is not organized for
the profit of any person or corporation, and which does not have as
one of its primary purposes or businesses, the provision of discount
buying services.
A discount buying organization does not include any person,
(4) Any person, corporation, unincorporated association, or
other organization, which, for a consideration collected from another
entity, provides or purports to provide the clients of the other
entity with the ability to purchase goods or services at discount
prices, if the clients of the other entity do not order from, or pay
any money to, that person, corporation, unincorporated association,
or other organization; however, the entity from which the customer
purchases the right to obtain goods or services at discount prices,
shall comply with the requirements of this title.
(b) "Contract for discount buying services" means a contract
between one party (hereinafter referred to as the "buyer") who is
purchasing the service for personal or family use, and a discount
buying organization, whereby the buyer for a consideration receives
the right to obtain goods or services from the discount buying
organization, or to utilize the discount buying organization services
in obtaining goods and services, at discount prices.
(c) "Discount prices" means prices which are represented to be
lower on most or all offered goods or services than those generally
charged for the items in the locality in which the representation is
made.
This definition is not intended to affect the degree of savings
which must be offered on an item or selection of items in order to
truthfully and without misleading consumers represent an item,
selection of items, or entire store as being "discount" or
"discounted."