BILL NUMBER: SB 916 AMENDED
BILL TEXT
AMENDED IN SENATE MAY 31, 2001
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 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, issue a refund within 10 days after the
escrow trustee receives a member's request, provide the Attorney
General and every prospective member with specified documents
relating to membership cancellation and refund terms, and
comply with other specified requirements.
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 a discount buying organization does not 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
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.
(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 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 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 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
or destruction of materials which allow the member to
access or use the 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 If the
fifty thousand dollars ($50,000) deposited in escrow is depleted
during the first year of the existence of the escrow account, the
corporation shall within three business days of depletion 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). At any time the balance in the escrow account
decreases to 50 percent of the amount funded that year, the
corporation shall within three business days replenish the account
back to the balance required at the beginning of that calendar year.
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 clause . 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 federally insured financial
institution independent of the corporation with escrow instructions
making the bank or 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
The escrow trustee shall issue the refund within 10 days of the date
the written request is received by the escrow trustee. In addition,
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.
and paid directly by the corporation.
(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)."
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 members devoted exclusively
to customer service questions and 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).
(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.
member must be advised, before any charges are
applied, that they need not provide billing information in order to
be charged a membership fee, in circumstances in which the
telemarketing firm has prior access to the member's billing
information.
(III) In the case of trial membership offers, the duration of the
trial period and that if the customer member
does not cancel within the trial period he or she will
automatically be charged the membership fee.
(IV) Specifically how the customer member
may cancel membership.
(V) The written disclosure, printed in capital letters with a
minimum 14-point boldface type, indicating who to contact, both
directly through the company and through the escrow account, for a
refund.
(VI) The written disclosure made at the time of solicitation and
at the time an enrollment package is sent to consumers.
(ii) If an organization provides documentation that clearly
explains membership fee cancellation and refund terms, which include
information required by clauses (i) to (iv)
subclauses (I) to (VI) , inclusive, of subparagraph
(E) clause (i) , to obtain this exemption, the
organization need not comply with Section 1584.5, 1812.106, or
1812.107.
(F) The disclosures listed in subclauses (I) to (VI), inclusive,
of clause (i) of subparagraph (E) shall be provided to every
prospective member.
(G) The exemption is null and void if the corporation fails to
comply with the conditions set forth in this section or if the
Attorney General's office revokes the exemption due to a corporation
not being in full compliance with all of the provisions of this
section.
(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.
(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, . However, if any person, corporation,
unincorporated association, or other organization from which the
other entity purchases the right to obtain goods or services at
discount prices for its clients, receives orders or payment directly
from the entity's clients, then that person, corporation,
unincorporated association, or other organization 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."