House File 100 - Introduced HOUSE FILE 100 BY WATTS A BILL FOR An Act prohibiting the automatic renewal of service contracts, 1 and providing a penalty. 2 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 3 TLSB 1139YH (4) 84 rn/nh

H.F. 100 Section 1. NEW SECTION . 555.1 Definitions. 1 As used in this chapter, unless the context otherwise 2 requires: 3 1. “Automatic renewal provision” means a provision pursuant 4 to which a service contract is renewed for a specified period, 5 whereby the renewal causes the service contract to be in effect 6 more than six months after the date the service contract was 7 initiated, and the renewal is effective unless the consumer 8 gives notice to the service provider of the consumer’s 9 intention to terminate the service contract. 10 2. “Consumer” means a person receiving service, maintenance, 11 or repair under a service contract. 12 3. “Service contract” means a contract for the provision 13 of service, maintenance, or repair with regard to goods or 14 services purchased, acquired, or utilized primarily for a 15 personal, family, or household purpose, in which payments are 16 automatically billed by the service provider and payable by 17 the consumer on a monthly or other regularly scheduled basis. 18 “Service contract” does not include a contract affecting any 19 right, title, estate, or interest in real property, nor the 20 purchase of goods or services under circumstances which would 21 constitute a consumer credit transaction as defined in section 22 537.1301. A door-to-door sale pursuant to section 555A.1 may 23 constitute a service contract subject to this chapter provided 24 the requirements of this chapter are otherwise met. 25 4. “Service provider” means a person providing service, 26 maintenance, or repair under a service contract. 27 Sec. 2. NEW SECTION . 555.2 Service contracts —— automatic 28 renewal —— prohibition. 29 1. A service contract shall not contain an automatic renewal 30 provision. Prior to renewal of a service contract, the service 31 provider shall provide a consumer written notice complying with 32 the requirements of subsection 2 that informs the consumer 33 that the contract shall terminate on a date specified in the 34 contract, and that renewal is conditioned upon receipt from the 35 -1- LSB 1139YH (4) 84 rn/nh 1/ 4

H.F. 100 consumer of acceptance of contract renewal. 1 2. Notice provided pursuant to subsection 1 shall be in 2 writing in clear and understandable language printed in an 3 easy-to-read type size and style, and shall be delivered by 4 regular mail, or prominently displayed on the first page 5 of a monthly statement, and supplied at least thirty days 6 prior to the termination date specified in the contract. The 7 notice shall also provide clearly understandable instructions 8 for notification by the consumer to the service provider of 9 acceptance of contract renewal. 10 3. A service provider shall not be held liable for 11 cancellation of a service contract if no notification of 12 acceptance was received from a consumer. Upon satisfactory 13 evidence submitted by a consumer that such notification was 14 sent, but not received, a service provider shall renew a 15 contract under the same terms and conditions as if notification 16 had been received in a timely manner. 17 Sec. 3. NEW SECTION . 555.3 Penalties. 18 1. A service provider who violates the provisions of this 19 chapter is guilty of a simple misdemeanor. 20 2. A violation of this chapter is a violation of section 21 714.16, subsection 2, paragraph “a” . 22 EXPLANATION 23 This bill prohibits the automatic renewal of service 24 contracts under specified circumstances. 25 The bill provides that an “automatic renewal provision” 26 means a provision under which a service contract is renewed 27 for a specified period, causing the contract to be in effect 28 more than six months after the date it was initiated, and 29 effective unless a consumer gives notice to the service 30 provider of the consumer’s intention to terminate the contract. 31 The bill defines a “consumer” as a person receiving service, 32 maintenance, or repair under a service contract, and a “service 33 provider” as a person providing such service, maintenance, or 34 repair. A “service contract” is defined as a contract for the 35 -2- LSB 1139YH (4) 84 rn/nh 2/ 4

H.F. 100 provision of service, maintenance, or repair with regard to 1 goods or services purchased, acquired, or utilized primarily 2 for a personal, family, or household purpose, in which payments 3 are automatically billed by the service provider and payable 4 by the consumer on a monthly or other regularly scheduled 5 basis. The bill excludes contracts affecting any right, title, 6 estate, or interest in real property, and contracts for the 7 purchase of goods or services under circumstances which would 8 constitute a consumer credit transaction as defined in Code 9 section 537.1301 from the definition, but includes door-to-door 10 sales pursuant to Code section 555A.1 which otherwise meet the 11 bill’s requirements. 12 The bill states that a service contract may not contain 13 an automatic renewal provision, and that prior to renewal 14 the service provider shall provide a consumer written notice 15 informing the consumer that the contract shall terminate on a 16 date specified in the contract, and that renewal is conditioned 17 upon receipt from the consumer of acceptance of contract 18 renewal. The bill provides that the notice shall be in writing 19 in clear and understandable language printed in an easy-to-read 20 type size and style, and either delivered by regular mail or 21 prominently displayed on the first page of a monthly statement 22 at least 30 days prior to the termination date specified in 23 the contract. The bill provides that the notice shall also 24 provide clearly understandable instructions for notification by 25 the consumer to the service provider of acceptance of contract 26 renewal. The bill holds a service provider not liable for 27 cancelling a service contract if no notification of acceptance 28 was received, but states that the provider shall be required to 29 reinstate the contract upon submission of satisfactory evidence 30 by a consumer that acceptance was in fact sent. 31 The bill provides that a violation of the bill’s provisions 32 constitutes a simple misdemeanor punishable by confinement for 33 no more than 30 days or a fine of at least $65 but not more 34 than $625 or by both. A violation shall also be considered 35 -3- LSB 1139YH (4) 84 rn/nh 3/ 4

H.F. 100 a consumer fraud under Code section 714.16, subsection 2, 1 paragraph “a”, punishable by a civil penalty of up to $40,000 2 per violation and a civil penalty up to $5,000 for each day 3 of intentional violation of a temporary restraining order, 4 preliminary injunction, or permanent injunction pursuant to 5 Code section 714.16. 6 -4- LSB 1139YH (4) 84 rn/nh 4/ 4