HOUSE FILE 100

BY  WATTS

A BILL FOR

An Act prohibiting the automatic renewal of service contracts, and providing a penalty.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

   Section 1.  NEW SECTION.  555.1  Definitions.
  As used in this chapter, unless the context otherwise requires:
   1.  “Automatic renewal provision” means a provision pursuant to which a service contract is renewed for a specified period, whereby the renewal causes the service contract to be in effect more than six months after the date the service contract was initiated, and the renewal is effective unless the consumer gives notice to the service provider of the consumer’s intention to terminate the service contract.
   2.  “Consumer” means a person receiving service, maintenance, or repair under a service contract.
   3.  “Service contract” means a contract for the provision of service, maintenance, or repair with regard to goods or services purchased, acquired, or utilized primarily for a personal, family, or household purpose, in which payments are automatically billed by the service provider and payable by the consumer on a monthly or other regularly scheduled basis. “Service contract” does not include a contract affecting any right, title, estate, or interest in real property, nor the purchase of goods or services under circumstances which would constitute a consumer credit transaction as defined in section 537.1301. A door-to-door sale pursuant to section 555A.1 may constitute a service contract subject to this chapter provided the requirements of this chapter are otherwise met.
   4.  “Service provider” means a person providing service, maintenance, or repair under a service contract.
   Sec. 2.  NEW SECTION.  555.2  Service contracts —— automatic renewal —— prohibition.
   1.  A service contract shall not contain an automatic renewal provision. Prior to renewal of a service contract, the service provider shall provide a consumer written notice complying with the requirements of subsection 2 that informs the consumer that the contract shall terminate on a date specified in the contract, and that renewal is conditioned upon receipt from the consumer of acceptance of contract renewal.
   2.  Notice provided pursuant to subsection 1 shall be in writing in clear and understandable language printed in an easy-to-read type size and style, and shall be delivered by regular mail, or prominently displayed on the first page of a monthly statement, and supplied at least thirty days prior to the termination date specified in the contract. The notice shall also provide clearly understandable instructions for notification by the consumer to the service provider of acceptance of contract renewal.
   3.  A service provider shall not be held liable for cancellation of a service contract if no notification of acceptance was received from a consumer. Upon satisfactory evidence submitted by a consumer that such notification was sent, but not received, a service provider shall renew a contract under the same terms and conditions as if notification had been received in a timely manner.
   Sec. 3.  NEW SECTION.  555.3  Penalties.
   1.
  A service provider who violates the provisions of this chapter is guilty of a simple misdemeanor.
   2.  A violation of this chapter is a violation of section 714.16, subsection 2, paragraph “a”. 
EXPLANATION
   This bill prohibits the automatic renewal of service contracts under specified circumstances.
   The bill provides that an “automatic renewal provision” means a provision under which a service contract is renewed for a specified period, causing the contract to be in effect more than six months after the date it was initiated, and effective unless a consumer gives notice to the service provider of the consumer’s intention to terminate the contract. The bill defines a “consumer” as a person receiving service, maintenance, or repair under a service contract, and a “service provider” as a person providing such service, maintenance, or repair. A “service contract” is defined as a contract for the provision of service, maintenance, or repair with regard to goods or services purchased, acquired, or utilized primarily for a personal, family, or household purpose, in which payments are automatically billed by the service provider and payable by the consumer on a monthly or other regularly scheduled basis. The bill excludes contracts affecting any right, title, estate, or interest in real property, and contracts for the purchase of goods or services under circumstances which would constitute a consumer credit transaction as defined in Code section 537.1301 from the definition, but includes door-to-door sales pursuant to Code section 555A.1 which otherwise meet the bill’s requirements.
   The bill states that a service contract may not contain an automatic renewal provision, and that prior to renewal the service provider shall provide a consumer written notice informing the consumer that the contract shall terminate on a date specified in the contract, and that renewal is conditioned upon receipt from the consumer of acceptance of contract renewal. The bill provides that the notice shall be in writing in clear and understandable language printed in an easy-to-read type size and style, and either delivered by regular mail or prominently displayed on the first page of a monthly statement at least 30 days prior to the termination date specified in the contract. The bill provides that the notice shall also provide clearly understandable instructions for notification by the consumer to the service provider of acceptance of contract renewal. The bill holds a service provider not liable for cancelling a service contract if no notification of acceptance was received, but states that the provider shall be required to reinstate the contract upon submission of satisfactory evidence by a consumer that acceptance was in fact sent.
   The bill provides that a violation of the bill’s provisions constitutes a simple misdemeanor punishable by confinement for no more than 30 days or a fine of at least $65 but not more than $625 or by both. A violation shall also be considered a consumer fraud under Code section 714.16, subsection 2, paragraph “a”, punishable by a civil penalty of up to $40,000 per violation and a civil penalty up to $5,000 for each day of intentional violation of a temporary restraining order, preliminary injunction, or permanent injunction pursuant to Code section 714.16.