Marks & Associates, P.C. 
Newsletter
May 2018
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Barry, Matt and Tammy will be attending the ELFA Legal Forum in Washington, D.C. May 6-8. During that time they will have access to email and voicemail, but the office will be closed. The Legal Forum is the largest gathering of lawyers working in our industry and always a good source of education, both formal and through interaction with lawyers facing some of the toughest issues out there.

One topic will be the increasing frequency of attempts by cities around the country to collect business license fees from out-of-state lessors. Barry participated in a conference call on that subject and plans to stay abreast of developments.

As always, if there is a legal issue you would like us to explore at the Legal Forum, send any of us an email. A copy of the agenda is available on the ELFA.org website, 

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USURY: There Are No Silver Bullets for this Werewolf
Even a man who is pure of heart
And says his prayers each night
Can become a wolf when the wolfbane blooms
And the autumn moon is bright
-          The Wolf Man, 1941 (sorry, couldn't resist)
 
 
Y'all remember the movies: A silver bullet in the heart killed the wolfman. Easy peasy, if you happen to have a silver-tipped .357 magnum lying around (shhh, don't give the NRA any ideas). The same was true for the stake-in-the heart or sunrise to the vampire and fire to the poor old Frankenstein monster. The common cold or something like it killed the Martians in War of the Worlds.
 
The point is that, in the movies, even the very worst terrors were overcome if you had the right formula. Defeating monsters was like a cookbook; follow the recipe and nothing was left to chance or the discretion of some alien or supernatural demon.
 
The law is not like that. We can predict some things with reasonable certainty, but when a matter lands before a judge, all bets are off and issues have a way of coming back to life like Jason or Freddy (I promise that is as far as I will take the analogy).
 
So it is with usury. Interest rate limitations in commercial transactions are part of the law of about a third of the states. For decades, the equipment finance industry has largely ignored these laws. Why?
 
  • Because the business grew out of leasing, not lending, and in most states it is pretty clear that rent is distinguished from principal and interest, at least in true leases.
  • Because many equipment lender/lessors were (and are) bank subsidiaries and enjoyed federal preemption of state usury laws until Dodd-Frank eliminated the preemption for subsidiaries.
  • Because the entire industry tended to fly under the radar, especially in small ticket transactions where implicit interest rates are more likely to exceed state limitations. In those transactions, it was not very likely that the matter would wind up in court because the small dollar amounts were not worth chasing a lessee or borrower through bankruptcy.
  • Because a lot of lessors and lenders, with or without advice of counsel, relied on choice of law or usury savings clauses and were not ever challenged.
 
Choice of law clauses direct the judge or other authority to apply the law of a state agreed to by the parties. Under the laws of most states, the chosen state must have a "reasonable relationship" or in some states, a "substantial relationship" to the transaction.
 
At the very least, one party must be incorporated or organized under the laws of the chosen state. For some judges in some states, that would not be enough: one party must be headquartered in the state, or the transaction must be negotiated, signed or performed in the state. Here judges get confused and sometimes apply the rules for making a determination when the parties do not specify one state or the other with the more lenient rules for determining whether to enforce the choice the parties did make.
 
So what happens if Lender's documents specify the laws of Good State where there is no usury limit, but Borrower is in Bad State where there is a low-ish (18%) legal cap and the deal involves 28% interest, implicit in the payments?
 
As a very general rule, the judge will respect the choice of law of the document. The problem is that the exceptions to the rule are usually judicially-created "yes, but's" and show up surprisingly often. Here is how the Restatement (2d) of Conflicts of Laws describes the main such exception:
 
§ 203. Usury

The validity of a contract will be sustained against the charge of usury if it provides for a rate of interest that is permissible in a state to which the contract has a substantial relationship and is not greatly in excess of the rate permitted by the general usury law of the state of the otherwise applicable law under the rule of § 188.
 
§ 188 contains the rules for determining what state's law applies if the contract does not specify a choice of law):
 
§ 188. Law Governing In Absence Of Effective Choice By The Parties
 

(1) The rights and duties of the parties with respect to an issue in contract are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties under the principles stated in § 6 [
general rules ].

(2) In the absence of an effective choice of law by the parties (see § 187), the contacts to be taken into account in applying the principles of § 6 to determine the law applicable to an issue include:

(a) the place of contracting,

(b) the place of negotiation of the contract,

(c) the place of performance,

(d) the location of the subject matter of the contract, and

(e) the domicile, residence, nationality, place of incorporation and place of business of the parties.

These contacts are to be evaluated according to their relative importance with respect to the particular issue.

(3) If the place of negotiating the contract and the place of performance are in the same state, the local law of this state will usually be applied, [except specific sections of the Restatement....]
 
In other words...the general rule faces an exception when the law of the chosen state has no usury limitation or a much higher limit than the state whose laws would otherwise apply. That determination, in turn, is under many state laws to be made by the judge in his or her discretion. In fact, where there is a significant disparity between the agreed rate and state law, the judge is more likely to ignore the choice of law because judges have broad rights to ignore contract provisions if in the interest of what is sometimes referred to as a compelling public policy.
 
 
Bear in mind that the Restatement is NOT LAW. It is more in the nature of an encyclopedia compiling and restating case and statutory law around the country. It has been criticized as being more about what the authors think the law should be than what it actually is. It may be cited by lawyers in court filings, but does not carry the weight of actual statutory or case law.
 
Selection of a state law that is part of a scheme to defraud a party or an effort to evade otherwise-applicable legal restraints may also be used by judges to ignore choice of laws. In fact, where a criminal usury action is brought by the state, the choice might be evidence of intent to break the law. Odd as that might sound, consider the Florida supreme court's refusal to apply a usury savings clause ("not to exceed the maximum rate permitted by law"):
[W]e conclude that a usury savings clause cannot, by itself, absolutely insulate a lender from a finding of usury. Rather, we approve and adopt the Fourth District's holding, that a usury savings clause is one factor to be considered in the overall determination of whether the lender intended to exact a usurious interest rate. ....Jersey Palm-Gross, Inc. v. Paper, 658 So. 2d 531, 535 (1995).
In other words, a contract provision designed to ensure that the rate is never higher than the legal limit might serve as evidence that the lender intends to charge a rate higher than the legal limit. So much for relying on usury savings clauses, or any magic bullet, to knock out a usury claim. (We also note that, whatever the case in civil usury cases, a charge of criminal usury would seem less likely to be affected by choice of law. Whether a prosecutor or court would liken a high rate in a business transaction as a proper application for statutes designed to thwart Tony Soprano is another question.)
 
Before throwing up your hands, consider that Tennessee's usury law upholds choice of law by statute and some states (Texas, Florida - yes Florida) have cases in which the courts uphold a choice of law that protects the lender when the borrower asserts a usury defense. The recent Delaware case of Change Capital Partners Fund I, LLC v. Volt Electrical Systems, LLC, (Del. Superior Ct., April 3, 2018) gives us even more comfort. In that case, the only connection to Delaware was that the lender was incorporated there. It had its offices in New York and the Borrower was a Texas LLC with offices in that state.
 
The Delaware superior court upheld the choice of Delaware law that was in the Merchant Receivables Purchase and Security Agreement, despite the borrower's allegation that the interest it paid worked out to over 102%, violating New York and Texas law, but not Delaware law (Delaware has no usury limitations). Would the case have been decided the same way by a New York or Texas judge?
 
The advice: don't rely on a choice of law clause or anything else as a sure-fire protection against usury defenses by the borrower. The judge will have broad discretion and it is better to be in the state you have selected in the choice of law clause than whatever state the borrower's counsel can show had a reasonable, or stronger, relationship to the transaction. Know the laws of the states where you lend, including how willing their courts will be to honor your agreement against a claim that public policy dictates they throw out your choice of law to protect their citizenry.

RUH RO

Debt Relief Companies Focus on Equipment Finance
 
We don't know about you, but our flesh crawls when we hear the ads on the radio:

"Don't let the [credit card companies, banks, lenders, loan companies] fool you!

You have the RIGHT to settle your debt for pennies on the dollar WITHOUT filing for bankruptcy!

Our experts can negotiate your debt down to a manageable level...blah, blah, blah."

It was one thing when these characters preyed on consumers, often ruining their credit recklessly while beating down VISA or AMEX. We know of at least one instance where the debt relief company was run by organized crime.

Recent complaints from one of our clients resulted in our visiting a couple of these websites, and finding specific references to equipment leases   https://www.dontdeclare.com/home/negotiate-equipment-leases/ and familiar names listed among the targeted companies. http://settlemycashadvance.com/lenders.php

In some cases, these firms focus on such claims as broad readings of usury (interest rate limitation) laws, alleged inadequate disclosures regarding force placed insurance and other matters and a host of state law idiosyncrasies that may or may not be addressed by choice of law and forum selection clauses. They encourage borrowers and lessees to try to cut down rents by threatening litigation or bankruptcy.

Now, as most of our readers know, we have railed against predatory practices such as collecting "automatic renewal rents" on EFAs and $1-out leases. Business is business and we have represented lessees as well as lessors with respect to many common industry practices. The issue is not one of morality or even business ethics so much as common sense: some lessors are inviting regulation of an equipment finance industry already feeling licensing and other state law pressures.
Our advice is to avoid working with debt relief companies if at all possible. The practice of just writing off a few dollars to avoid trouble makes good sense where there is a real issue as to enforceability of the loan or failure to obtain a license, or any time a lawsuit will result in a significant write off in bankruptcy, BUT if a debt relief company is involved, settlement might result in a flood of additional demands. Whatever your policy for dealing with customer defaults, it may be better to fight than settle where someone is planning on bragging in public about saving your customer money at your expense.
 
State Laws Regulating Automatic Renewal Clauses in
Tangible Personal Property and Service Contracts
Updated on July 26, 2012
 
Covering All Contracts
  • Louisiana
  • New York
  • Rhode Island
Covering Business Contracts Only
  • Wisconsin
Covering Consumer Contracts Only
  • California
  • Connecticut
  • Hawaii                                  (Effective July 1, 2012)
  • Illinois
  • North Carolina
  • Oregon                                 (Effective January 1, 2012)
Covering Service Contracts Only
  • Florida
  • New Mexico
  • Utah                                      (Amendments by 2011 UT HB 194 effective July 1, 2011)
Covering Consumer Alarm / Security Contracts Only
  • Arkansas
  • Tennessee
 
The following laws have been formatted to resemble the originals. Links to online state legal sources are provided above the copied text; in the case of recently enacted laws, links to the bill text are provided.

 
 
 
Automatic Renewal Laws Covering All Contracts
 
Louisiana Automatic Renewal Law
Louisiana Revised Statutes 9:2716
 
§2716. Contracts with automatic renewal clauses
 
A. Any person, firm, or corporation engaged in commerce that sells, leases, or offers to sell or lease, any products or services to a consumer pursuant to a contract, when the contract automatically renews unless the consumer cancels the contract, shall disclose the automatic renewal clause clearly and conspicuously in the contract or contract offer.
 
B. Any person, firm, or corporation engaged in commerce that sells, leases, or offers to sell or lease, any products or services to a consumer pursuant to a contract, when the contract automatically renews unless the consumer cancels the contract, shall disclose clearly and conspicuously how to cancel the contract in the initial contract, contract offer, or with delivery of products or services.
 
C. A person, firm, or corporation that fails to comply with the requirements of this Section is in violation of this Section unless the person, firm, or corporation demonstrates all of the following:
 
(1) It has established and implemented written procedures to comply with this Section and enforces compliance with the procedures.
 
(2) Any failure to comply with this Section is the result of error.
 
(3) When an error has caused the failure to comply with this Section, it, as a matter of routine business practice, provides a full refund or credit for all amounts billed to or paid by the consumer from the date of the renewal until the date of the termination of the contract, or the date of the subsequent notice of renewal, whichever occurs first.
 
D. The provisions of this Section shall not apply to the following:
 
(1) The Louisiana Rental-Purchase Agreement Act as provided in R.S. 9:3351 through 3362.
 
(2) Banks, trust companies, savings and loan associations, savings banks, credit unions, finance or credit companies, industrial loan companies, or any other financial institution licensed or organized under the laws of any state or the United States, or any foreign bank maintaining a branch or agency licensed under the laws of the United States, or any subsidiary or affiliate thereof.
 
(3) Insurers licensed under Title 22 of the Louisiana Revised Statutes of 1950.
 
(4) A contract entered into before January 1, 2011.
 
(5) A contract that allows for cancellation by the consumer by written notice within thirty days or within one month, after the initial period has expired.
 
E. Any contract automatically renewed in violation of this Section shall revert to a thirty day renewal contract in accordance with the same terms.

 
 
 
New York Automatic Renewal Law

General Obligations (GOB), Article 5, Title 9, Sections 5-901 & 5-903
 
Title 9 - REQUIREMENTS OF NOTICE FOR EFFECTIVENESS OR ENFORCEABILITY
 
                § 5-901 . Certain provisions of leases of personal property inoperative unless notice thereof given to lessee. No provision of a lease of any personal property which states that the term thereof shall be deemed renewed for a specified additional period unless the lessee gives notice to the lessor of his intention to release the property at the expiration of such term, shall be operative unless the lessor, at least fifteen days and not more than thirty days previous to the time specified for the furnishing of such notice to him, shall give to the lessee written notice, served personally or by mail, calling the attention of the lessee to the existence of such provision in the lease. Nothing herein contained shall be construed to apply to a contract in which the automatic renewal period specified is one month or less.
 
                § 5-903 . Automatic renewal provision of contract for service, maintenance or repair unenforceable by contractor unless notice thereof given to recipient of services.

                1. As used in this section, "person" means an individual, firm, company, partnership or corporation.

                2. No provision of a contract for service, maintenance or repair to or for any real or personal property which states that the term of the contract shall be deemed renewed for a specified additional period unless the person receiving the service, maintenance or repair gives notice to the person furnishing such contract service, maintenance or repair of his intention to terminate the contract at the expiration of such term, shall be enforceable against the person receiving the service, maintenance or repair, unless the person furnishing the service, maintenance or repair, at least fifteen days and not more than thirty days previous to the time specified for serving such notice upon him, shall give to the person receiving the service, maintenance or repair written notice, served personally or by certified mail, calling the attention of that person to the existence of such provision in the contract.
                3. Nothing herein contained shall be construed to apply to a contract in which the automatic renewal period specified is one month or less.

 
Are automatic lease renewal provisions enforceable in NY?


STATUES/CASES:
Many leases of personal property typically contain an automatic renewal provision that provides, in effect, that the lease or contract will automatically renew for a specified term unless the lessee sends notice of its intention not to renew prior to the lease expiration. In NY, such provisions are not enforceable unless the lessor sends by certified mail, or serves personally, written notice of the renewal provision to the lessee which must be received at least 15, but no more than 30, days prior to the time the lessee is required to give notice of its intention not to renew (unless the renewal period is one month or less). General Obligations Law § 5-901

COMMENTS:
The same rule applies in New York for automatic renewal provisions of contracts for service, maintenance or repair. General Obligations Law § 5- 903. At least one trial-level court in New York has ruled that a lessor cannot avoid the impact of New York's notice requirement by use of a choice of law provision in their lease documents. See Andin International v. Matrix Funding Corp., 194 Misc.2d 719, 756 N.Y.S.2d 724 (NY County Sup. Ct. 2003)(notwithstanding a Utah choice of law clause in an equipment lease agreement, the trial court stated that the NY notice statute is applicable" [i]n view of the public policy purpose behind the section"). In the case of Ovitz v. Bloomberg L.P., over a strenuous dissent, the lessor/service provider dodged a bullet and was successful in having a class-action complaint dismissed on the pleadings, notwithstanding that the plaintiff had clearly alleged that the lessor/service provider had violated the New York statutes. Ovitz v. Bloomberg L.P., 18 N.Y.3d 753, 944 N.Y.S.2d 725 (2012). In Ovitz, the complaint alleged that the original term of the lease/service contract expired in 2002 and that the defendant did not send the statutorily required notice of automatic renewal. The plaintiff continued to use and pay for the equipment and services until 2008, at which time he notified the defendant that he wished to terminate. However, the defendant responded by advising the plaintiff that the lease/service agreement had automatically renewed to 2010. After an exchange of email between the parties and unsuccessful demands by the defendant for payment, the plaintiff filed a class-action complaint against defendant, alleging various statutory and common-law claims, and seeking declaratory and injunctive relief, in addition to other relief. Two weeks after suit was filed, defendant waived all fees "as an accommodation" to plaintiff. After several years of litigation, the case was dismissed, primarily because the plaintiff had not paid for any services it did not receive and thus no monetary damages were suffered. In effect, the court held "no harm, no foul". There was a strenuous dissent to the decision, however, which stressed the defendant's alleged admission that it was its "policy" not to send renewal notices and to then vigorously pursue its lessees to collect unenforceable fees. In the dissent's view, the "no harm, no foul" approach was inappropriate and the case should have been allowed to proceed, given the plaintiff's allegation that the putative class members "are entitled to injunctive relief necessary to ensure that Bloomberg's 'illegal, unfair and deceptive conduct will not continue into the future'".

 

Rhode Island Automatic Renewal Law
Title 6: Commercial Law - General Regulatory Provisions; Chapter 6-13: Unfair Sales Practices; Section 6-13-14
 
                § 6-13-14 Automatic lease renewal - Notice required. - (a) For purposes of this section, "automatic lease renewal" means a provision in a written lease of personal property providing that, unless the lessee gives written notice to the contrary, the lease shall be automatically renewed for an additional term at the end of the initial lease term or at the end of any subsequent lease term.

                (b) Subject to the exclusions stated in subsection (d) of this section, every lessor of personal property under a written lease containing an automatic lease renewal shall give written notice to the lessee not more than ninety (90) nor less than forty-five (45) days prior to the expiration of the lease term. The notice shall state the date upon which the lease term will expire and shall advise the lessee that the lease will be automatically renewed unless the lessee gives written notice to the contrary.

                (c) In the event that the lessor fails to give notice as required by subsection (b) of this section, the automatic lease renewal shall be voidable at the option of the lessee.

                (d) This section shall not apply to any lease having a term of less than one year. This section shall not apply to any lease wherein the fair market value of the property being leased exceeds one hundred thousand dollars ($100,000) on the date the lease is executed.
T

 
 
 
Automatic Renewal Laws Covering Business Contracts Only
 
Wisconsin Automatic Renewal Law
Wisconsin Statutes 134.49: Renewals and extensions of business contracts
 
134.49 Renewals and extensions of business contracts.

(1) Definitions. In this section:

(a) "Business contract" means a contract that is entered into for the lease of business equipment, if any of the business equipment is used primarily in this state, or for providing business services, but only if the contract is for the direct benefit of the end user of the business equipment or business services. "Business contract" does not include any of the following:

1. A contract in which a customer agrees to purchase from a seller an undetermined amount of business services or lease from the seller an undetermined amount of business equipment, and agrees to pay the seller based on the amount of business services received or business equipment leased, subject to a predetermined minimum payment in a 12-month period specified in the contract, if the predetermined minimum payment is $250,000 or more.

2. A contract for the lease or purchase of real property.

3. A contract for the lease of a vehicle for which a certificate of title has been issued under ch. 342.

4. A contract for the lease of medical equipment.

5. A contract derived from a tariff issued by an energy utility, as defined in s. 196.027 (1) (c).

6. A contract for the lease of equipment that is for personal, family, or household purposes.

7. A contract for the purchase of services that are for personal, family, or household purposes.

8. A contract for the lease or purchase of access service, as defined in s. 196.01 (1b).

9. An interconnection agreement, as defined in s. 196.01 (3b), or a contract or agreement offered by a telecommunications utility, as defined in s. 196.01 (10), to meet obligations imposed on the telecommunications utility under 47 USC 151 to 276.

10. A contract for the lease or purchase of telecommunications service, as defined in s. 196.01 (9m), including commercial mobile service, as defined in s. 196.01 (2i), if the contract is derived from a tariff issued by a telecommunications provider, as defined in s. 196.01 (8p), or if the contract permits the lessee or purchaser to terminate the contract after an automatic renewal by giving written notice, permits the termination to take effect not more than one month after receipt of the written notice, and permits a termination without liability for fees or penalties other than a payment for services or equipment used during the period before the termination takes effect, if the amount of the payment is one of the following:

a. The amount of the periodic payment due under the contract multiplied by the number of periods during which the services or equipment are provided before the termination takes effect.

b. If the contract does not provide for periodic payments, a portion of the amount due under the contract that is proportional to the portion of the renewed contract term that elapsed before the termination takes effect.

11. A contract that permits a customer to terminate an automatically renewed or extended contract period by giving the seller notice of the customer's intention to terminate the contract period, if the contract does not require the customer to give notice to the seller more than one month before the date of the customer's intended termination.

12. A contract to which a federal, state, or local government entity is a party.

13. A contract between a cooperative association organized under ch. 185 and a member of the cooperative, or a contract under which a cooperative association organized under ch. 185 is a seller.

14. A contract for the lease, maintenance, repair, service, or inspection of elevator or escalator systems, including mechanical and electrical components of such systems when built into real property.

(b) "Customer" means a person who conducts business in this state and who is the lessee under a business contract that is entered into for the lease of business equipment or the purchaser under a business contract that is entered into for the purchase of business services.

(c) "Seller" means the provider of a business service or the lessor of business equipment under a business contract.

(2) Disclosure required.

(a) Subject to par. (d), if a business contract that is entered into, modified, or renewed after May 1, 2011, provides that the contract will be automatically renewed or extended for an additional period unless the customer declines renewal or extension, and the duration of the additional period is more than one month, the seller shall do one of the following:

1. At the time the customer enters into the contract, present to the customer a copy of a form including the disclosures required under par. (b) and obtain the customer's signature on the form.
2. Include the disclosures required under par. (b) in the contract in a conspicuous manner and obtain the customer's initials on the contract on a page on which a disclosure appears.

(b) A disclosure required under par. (a) shall contain all of the following:

1. A statement that the contract will be renewed or extended unless the customer declines renewal or extension.

2. A statement  indicating the duration of the additional contract period that would result from an automatic renewal or extension period .

3. A statement indicating whether an increase in charges to the customer will apply upon an automatic renewal or extension.

4. A description of action the customer must take to decline renewal or extension.

5. The date of the deadline for the customer to decline renewal or extension.

(c) If a seller fails to comply with par. (a), an automatic renewal or extension provision in the contract is not enforceable, and the contract terminates at the end of the current contract term.

(d) Paragraph (a) does not apply to a contract in effect on May 1, 2011, or to subsequent renewals of such a contract.

(3) Notice required. If a business contract that has an initial term of more than one year provides that the contract will be automatically renewed or extended for an additional term of more than one year, unless the customer declines renewal or extension, and the deadline for the customer to decline renewal or extension of the contract is more than 60 days after May 1, 2011, the provision is not enforceable against the customer and the contract will terminate at the end of the current contract term unless the seller provides to the customer, at least 15 days but not more than 60 days before the deadline for the customer to decline renewal or extension, a written notice containing all of the following:

(a) A statement that the contract will be renewed or extended unless the customer declines renewal or extension.

(b) The deadline for the customer to decline renewal or extension.

(c) A description of any increase in charges to the customer that will apply after renewal or extension.

(d) A description of action that the customer must take to decline extension or renewal.

(4) Manner of giving notice. A seller or a person acting on behalf of the seller shall give the written notice required under sub. (3) by any of the following methods:

(a) By mailing a copy of the notice by regular U.S. mail to the customer at the customer's last-known business address, unless the contract requires the customer to notify the seller by certified mail of the customer's intent to cancel.

(b) By mailing a copy of the notice by registered or certified mail to the customer at the customer's last-known business address.

(c) By giving a copy of the notice personally to an owner, officer, director, or managing agent of the customer's business.

(d) By including the notice on the first page of a monthly invoice sent to the customer. Notice under this paragraph shall be prominently displayed in bold face type and in a type size no smaller than 12-point.

(e) By sending a facsimile to the customer to the customer's last-known facsimile number, if the contract permits the customer to use this method to notify the seller that the customer declines renewal or extension of the contract.

(f) By sending an electronic mail message to the customer at the customer's last-known electronic mail address, if the contract permits the customer to use this method to notify the seller that the customer declines renewal or extension of the contract.

(g) By sending the notice via a recognized overnight courier service, if the contract permits the customer to use this method to notify the seller that the customer declines renewal or extension of the contract.

(5) Unenforceable terms. No business contract between a seller and a customer that is entered into, modified, or renewed after May 1, 2011, may require that the customer permit the seller to match any offer the customer receives from or makes to another seller for services to be provided after the end of the stated term of the contract or renewal period of the contract. A provision in a business contract that violates this subsection is void and unenforceable.

(6) Remedies.

(a) Any of the following customers may bring an action or counterclaim for damages against a seller:

1. A customer who has notified a seller that the customer declines renewal or extension of a business contract to which sub. (3) applies, if the seller has failed to give notice as required under subs. (3) and (4) and the seller has refused to terminate the contract as requested by the customer.

2. A customer against whom a seller has attempted to enforce a provision in a business contract that is unenforceable under sub. (5).

(am) Notwithstanding par. (a) 1., if a seller who fails to give to a customer a notice required under sub. (3) subsequently receives notice that the customer declines renewal or extension and agrees to terminate the contract as of the date the customer notified the seller, the customer is responsible for charges incurred by the customer under the contract before the date on which the customer notified the seller and the customer may not bring an action against the seller based on the seller's failure to provide the required notice, unless the seller's failure to provide the required notice was willful or malicious.

(b) A customer who prevails in an action or counterclaim under par. (a) is entitled to damages in either of the following amounts:

1. An amount that equals twice the amount of the damages incurred by the customer.

2. An amount that equals twice the amount of the periodic payment specified in the contract or $1,000, whichever is less.

(c) Notwithstanding the limitations in s. 814.04 (1), the court shall award a customer who prevails in an action or counterclaim under this subsection costs, including reasonable attorney fees.

(d) A seller is not liable in an action or counterclaim under this subsection if the court finds either of the following:

1. All of the following:

a. The seller has established and implemented written procedures for complying with this section.

b. The seller's failure to comply with subs. (3) and (4), or the seller's attempt to enforce a provision that is void and unenforceable under sub. (5), was not willful or malicious.

c. The seller has refunded any amounts paid by the customer after the date of the renewal or extension until the date on which the business contract is terminated.

2. The customer requested, in writing, renewal or extension of the contract that is the basis for the customer's action or counterclaim against the seller, and the customer was aware of the terms under which the contract would be renewed or extended.

Are evergreen provisions enforceable in Wisconsin?


STATUES/CASES:
Wisconsin Statutes Section 134.49 regulates evergreen provisions in business contracts. Under the statute, a "business contract" is defined as "a contract that is entered into for the lease of business equipment, if any of the business equipment is used primarily in this state, or for providing business services, but only if the contract is for the direct benefit of the end user of the business equipment or business services." Wis. Stat. § 134.49(1)(a). Wisconsin's law includes 14 exemptions, including (i) leases with total annual rents of $250,000 or more, (ii) leases of real property, (iii) leases of titled vehicles, (iv) leases of medical equipment, (v) leases of equipment or for the purchase of personal services that are for personal, family, or household purposes, (vi) leases permitting cancellation by lessee upon one month's notice, and (vii) leases to governmental entities. Wis. Stat. § 134.49(1)(a)(1)-(14). Renewals of More Than One Month If a business contract is entered into, modified or renewed after May 1, 2011, and has an evergreen provision that renews or extends the contract for more than a one-month term, the seller is required to either: (a) present the customer with the required disclosures and obtain the customer's signature on the form at the time the customer enters into the contract; or (b) include the required disclosures in the contract in a conspicuous manner and obtain the customer's initials on the contract on the page on which the disclosure appears. Wis. Stat. §134.49(2)(a). The required disclosures must include: (1) a statement that the contract will be renewed or extended automatically unless the customer declines renewal or extension; (2) the duration of the renewal or extension; (3) a statement indicating whether the renewal or extension will result in an increase in charges; (4) a description of how to decline renewal or extension; and (5) the deadline for declining renewal or extension. Wis. Stat. §134.49(2)(b). If a seller fails to comply with these requirements, an automatic renewal or extension provision in the contract is not enforceable, and the contract terminates at the end of the current contract term. Wis. Stat. §134.49(2)(c). These requirements do not apply to a contract in effect on May 1, 2011, or to subsequent renewals of such a contract. Wis. Stat. §134.49(2)(d). Renewals of More Than One Year for Contracts of More Than One Year If a business contract has an initial term of more than one year and an evergreen provision that renews the contract for more than one year, and the deadline for the customer to decline renewal or extension of the contract is more than 60 days after May 1, 2011, then the customer must be given written notice that the contract will be renewed automatically at least 15 days, but not more than 60 days, before the deadline to decline renewal or extension. Wis. Stat. §134.49(3). The written notice must include: (1) a statement that the contract will be renewed or extended unless the customer declines renewal or extension; (2) the deadline for the customer to decline renewal or extension; (3) a description of any increase in charges to the customer that will apply after renewal or extension; and (4) a description of action that the customer must take to decline renewal or extension. Wis. Stat. §134.49(3)(a)-(d). A seller or a person acting on behalf of the seller can give the required written notice by any of the following methods: (a) by mailing a copy of the notice by regular U.S. mail to the customer at the customer's last-known business address, unless the contract requires the customer to notify the seller by certified mail of the customer's intent to cancel; (b) by mailing a copy of the notice by registered or certified mail to the customer at the customer's last-known business address; (c) by giving a copy of the notice personally to an owner, officer, director, or managing agent of the customer's business; (d) by including the notice on the first page of a monthly invoice sent to the customer. Notice under this paragraph shall be prominently displayed in bold face type and in a type size no smaller than 12-point; (e) by sending a facsimile to the customer to the customer's last-known facsimile number, if the contract permits the customer to use this method to notify the seller that the customer declines renewal or extension of the contract; (f) by sending an electronic mail message to the customer at the customer's last-known electronic mail address, if the contract permits the customer to use this method to notify the seller that the customer declines renewal or extension of the contract; (g) by sending the notice via a recognized overnight courier service, if the contract permits the customer to use this method to notify the seller that the customer declines renewal or extension of the contract. Wis. Stat. §134.49(4). If a seller fails to comply with these requirements, an automatic renewal or extension provision in the contract is not enforceable, and the contract terminates at the end of the current contract term. Wis. Stat. §134.49(3). Customers who have notified a seller that the customer declines renewal or extension of a business contract may bring an action or counterclaim for damages against a seller if the seller has failed to give the required notice or has failed to serve the required notice in the required way and the seller has refused to terminate the contract as requested by the customer. Wis. Stat. §134.49(6)(a)(1). A customer who prevails in an action or counterclaim is entitled to damages in either of the following amounts: (1) an amount that equals twice the amount of the damages incurred by the customer; or (2) an amount that equals twice the amount of the periodic payment specified in the contract or $1,000, whichever is less. Wis. Stat. §134.49(6)(b). The customer can also recover costs, including reasonable attorney fees. Wis. Stat. §134.49(6)(c). If a seller who fails to give to a customer the required written notice subsequently receives notice that the customer declines renewal or extension and agrees to terminate the contract as of the date the customer notified the seller, the customer is responsible for charges incurred by the customer under the contract before the date on which the customer notified the seller and the customer may not bring an action against the seller based on the seller's failure to provide the required notice, unless the seller's failure to provide the required notice was willful or malicious. Wis. Stat. §134.49(6)(am). Unenforceable Terms No business contract between a seller and a customer that is entered into, modified, or renewed after May 1, 2011, may require that the customer permit the seller to match any offer the customer receives from or makes to another seller for services to be provided after the end of the stated term of the contract or renewal period of the contract. Wis. Stat. §134.49(5). A provision in a business contract that violates this subsection is void and unenforceable. Id. A customer against whom a seller has attempted to enforce such a provision in a business contract may bring an action or counterclaim for damages against the seller. Wis. Stat. §134.49(6)(a)(2). A customer who prevails in such an action or counterclaim is entitled to damages in either of the following amounts: (1) an amount that equals twice the amount of the damages incurred by the customer; or (2) an amount that equals twice the amount of the periodic payment specified in the contract or $1,000, whichever is less. Wis. Stat. §134.49(6)(b). The customer can also recover costs, including reasonable attorney fees. Wis. Stat. §134.49(6)(c). Safe Harbor A seller is not liable in an action or counterclaim if the court finds either of the following: (1) all of the following: (a) the seller has established and implemented written procedures for complying with Wisconsin's evergreen law; (b) the seller's failure to comply with the required written notice or the seller's failure to send the required notice in the required way or the seller's attempt to enforce a provision that is void and unenforceable was not willful or malicious; (c) the seller has refunded any amounts paid by the customer after the date of the renewal or extension until the date on which the business contract is terminated; or (2) the customer requested, in writing, renewal or extension of the contract that is the basis for the customer's action or counterclaim against the seller, and the customer was aware of the terms under which the contract would be renewed or extended. Wis. Stat. §134.49(6)(d).
 

 
 
Automatic Renewal Laws Covering Consumer Contracts Only
 
California Automatic Renewal Law

Business & Professions Code Section 17600-17606 : Division 7, Part 3, Chapter 1, Article 9: Automatic Purchase Renewals
 
17600. It is the intent of the Legislature to end the practice of ongoing charging of consumer credit or debit cards or third party payment accounts without the consumers' explicit consent for ongoing shipments of a product or ongoing deliveries of service.
 
17601. For the purposes of this article, the following definitions shall apply:
                (a) "Automatic renewal" means a plan or arrangement in which a paid subscription or purchasing agreement is automatically renewed at the end of a definite term for a subsequent term.
                (b) "Automatic renewal offer terms" means the following clear and conspicuous disclosures:
                (1) That the subscription or purchasing agreement will continue until the consumer cancels.
                (2) The description of the cancellation policy that applies to the offer.
                (3) The recurring charges that will be charged to the consumer's credit or debit card or payment account with a third party as part of the automatic renewal plan or arrangement, and that the amount of the charge may change, if that is the case, and the amount to which the charge will change, if known.
                (4) The length of the automatic renewal term or that the service is continuous, unless the length of the term is chosen by the consumer.
                (5) The minimum purchase obligation, if any.
                (c) "Clear and conspicuous" or "clearly and conspicuously" means in larger type than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same size, or set off from the surrounding text of the same size by symbols or other marks, in a manner that clearly calls attention to the language. In the case of an audio disclosure, "clear and conspicuous" and "clearly and conspicuously" means in a volume and cadence sufficient to be readily audible and understandable.
                (d) "Consumer" means any individual who seeks or acquires, by purchase or lease, any goods, services, money, or credit for personal, family, or household purposes.
                (e) "Continuous service" means a plan or arrangement in which a subscription or purchasing agreement continues until the consumer cancels the service.
 
17602. (a) It shall be unlawful for any business making an automatic renewal or continuous service offer to a consumer in this state to do any of the following:
                (1) Fail to present the automatic renewal offer terms or continuous service offer terms in a clear and conspicuous manner before the subscription or purchasing agreement is fulfilled and in visual proximity, or in the case of an offer conveyed by voice, in temporal proximity, to the request for consent to the offer.
                (2) Charge 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 to the agreement containing the automatic renewal offer terms or continuous service offer terms.
                (3) Fail to provide an acknowledgment that includes the automatic renewal or continuous service offer terms, cancellation policy, and information regarding how to cancel in a manner that is capable of being retained by the consumer. If the offer includes a free trial, the business shall also disclose in the acknowledgment how to cancel and allow the consumer to cancel before the consumer pays for the goods or services.
                (b) A business making automatic renewal or continuous service offers shall provide a toll-free telephone number, electronic mail address, a postal address only when the seller directly bills the consumer, or another cost-effective, timely, and easy-to-use mechanism for cancellation that shall be described in the acknowledgment specified in paragraph (3) of subdivision (a).
                (c) In the case of a material change in the terms of the automatic renewal or continuous service offer that has been accepted by a consumer in this state, the business shall provide the consumer with a clear and conspicuous notice of the material change and provide information regarding how to cancel in a manner that is capable of being retained by the consumer.
                (d) The requirements of this article shall apply only prior to the completion of the initial order for the automatic renewal or continuous service, except as follows:
                (1) The requirement in paragraph (3) of subdivision (a) may be fulfilled after completion of the initial order.
                (2) The requirement in subdivision (c) shall be fulfilled prior to implementation of the material change.
 
17603. In any case in which a business sends any goods, wares, merchandise, or products to a consumer, under a continuous service agreement or automatic renewal of a purchase, without first obtaining the consumer's affirmative consent as described in Section 17602, the goods, wares, merchandise, or products shall for all purposes be deemed an unconditional gift to the consumer, who may use or dispose of the same in any manner he or she sees fit without any obligation whatsoever on the consumer's part to the business, including, but not limited to, bearing the cost of, or responsibility for, shipping any goods, wares, merchandise, or products to the business.
 
17604. (a) Notwithstanding Section 17534, a violation of this article shall not be a crime. However, all available civil remedies that apply to a violation of this article may be employed.
                (b) If a business complies with the provisions of this article in good faith, it shall not be subject to civil remedies.
 
17605. The following are exempt from the requirements of this article:
                (a) Any service provided by a business or its affiliate where either the business or its affiliate is doing business pursuant to a franchise issued by a political subdivision of the state or a license, franchise, certificate, or other authorization issued by the California Public Utilities Commission (CPUC).
                (b) Any service provided by a business or its affiliate where either the business or its affiliate is regulated by the CPUC, the Federal Communications Commission, or the Federal Energy Regulatory Commission.
                (c) Any entity regulated by the Department of Insurance.
                (d) Alarm company operators, as defined in Section 7590.2, and regulated pursuant to Chapter 11.6 (commencing with Section 7590) of Division 3.
                (e) A bank, bank holding company, or the subsidiary or affiliate of either, or a credit union or other financial institution, licensed under state or federal law.
                (f) Service contract sellers and service contract administrators regulated by the Bureau of Electronic and Appliance Repair pursuant to Article 4.5 (commencing with Section 9855) of Chapter 20 of Division 3.
 
17606. This article shall become operative on December 1, 2010.
 

 
 
Connecticut Automatic Renewal Law

Connecticut General Statutes Chapter 739, § 42-126b:   Unsolicited sending of goods.  Cancellation of trial offers and introductory rate offers. Automatic renewals. Unfair trade practices. (a) No person, firm, partnership, association or corporation, or agent or employee thereof, shall, in any manner, or by any means, offer for sale goods, wares or merchandise, where the offer includes the voluntary and unsolicited sending of goods, wares or merchandise not actually ordered or requested by the recipient, either orally or in writing. The receipt of any such unsolicited goods, wares or merchandise shall for all purposes be deemed an unconditional gift to the recipient who may use or dispose of the same in any manner such recipient sees fit without any obligation on such recipient's part to the sender.
 
                (b) Any person, firm, partnership, association or corporation that sells or offers to sell any products or services used primarily for personal, family or household purposes pursuant to a trial offer or at an introductory rate that will change at the end of the introductory rate period, shall provide the recipient of such products or services with clear and conspicuous written notice that the recipient may cancel such products or services upon the expiration of such trial offer or introductory rate period. Such notice shall include the procedure for such cancellation and shall be provided with any written promotional material for such products or services furnished to the recipient before the start of the trial offer or the introductory rate period or with the initial delivery of such products or services to the recipient. Any such products or services furnished to the recipient after the expiration of such trial offer or introductory rate period, where such trial offer or introductory rate period is cancelled or not otherwise renewed or continued by the recipient, shall be deemed an unconditional gift under subsection (a) of this section. The provisions of this subsection shall not apply to (1) any trial offer or introductory rate period provided by a public service company, as defined in section 16-1, an affiliate or subsidiary of such public service company, or any certified telecommunications provider, as defined in section 16-1, to any consumer with whom such public service company, affiliate or subsidiary, or certified telecommunications provider has an established and ongoing business relationship, provided such public service company, affiliate or subsidiary, or certified telecommunications provider shall inform such consumer of the procedure to cancel such trial offer or to cancel after the expiration of the introductory rate period, (2) any transaction involving the use of a negative option plan that is governed by 16 CFR Part 425, (3) any contract subject to the provisions of sections 36a-675 to 36a-685, inclusive, and (4) any introductory rate where the rate paid by the consumer after the end of the introductory rate period has been clearly and conspicuously disclosed to the consumer in the contract.
 
                (c) (1) Any person, firm, partnership, association or corporation that sells or offers to sell any products or services used primarily for personal, family or household purposes for a specified period of time of more than one hundred eighty days pursuant to a written contract that contains a provision for automatic renewal of the contract for a period of time of more than thirty-one days at the end of the period of time specified in the contract shall provide the recipient of such products or services with a clear and conspicuous written notice that the recipient may cancel such contract. Such notice shall include the procedure for such cancellation. Such notice shall be given at least fifteen days but not more than sixty days prior to: (A) The date upon which the contract will be renewed, or (B) the expiration of the time period for cancellation by the recipient, whichever time period is earlier. Mailing of the written notice required by this subdivision by United States mail to the address of the recipient listed in the contract shall satisfy the notice requirements of this subdivision. If a contract subject to the provisions of this subsection is entered into electronically or the consumer agrees to receive notice electronically, the written notice required by this subsection may be transmitted by electronic mail.
 
                (2) Any person, firm, partnership, association or corporation that sells or offers to sell any products or services used primarily for personal, family or household purposes for a specified period of time of one hundred eighty days or less pursuant to a written contract that contains a provision for automatic renewal of the contract for a period of time of more than thirty-one days at the end of the period of time specified in the contract, shall include in such contract a clear and conspicuous written notice that the recipient of such products or services may cancel such contract and the procedure for such cancellation, provided the recipient shall not be required to exercise such right of cancellation more than sixty days prior to the expiration of the specified period of time.
 
                (3) If such notice is not provided to the recipient in accordance with subdivision (1) of this subsection or included in the contract in accordance with subdivision (2) of this subsection, as the case may be, any such products or services furnished to the recipient after the expiration of the period of time specified in the contract shall be deemed an unconditional gift under subsection (a) of this section.
 
                (4) Nothing in this subsection shall be construed to apply to a health club contract subject to the provisions of section 21a-219, a contract subject to the provisions of sections 36a-675 to 36a-685, inclusive, or any contract between a condominium or housing association and a person other than an individual.
 
                (d) The provisions of this section shall not apply to any banking, insurance or securities product or service, the provision of which is subject to regulation or licensing by the state or a federal agency.
 
                (e) A violation of any provision of this section shall be deemed an unfair or deceptive trade practice under subsection (a) of section 42-110b.
 
 
Hawaii Automatic Renewal Law

Hawaii Revised Statutes § 481-9.5 Passed by 2011 Hawaii HB 663; effective July 1, 2012
 
                [§481 -9.5] Automatic renewal clauses. [Section effective on July 1, 2012. L 2011, c 139, §4.] (a) Any person who sells or offers to sell any products or services to a consumer pursuant to a consumer contract that has a specified term of more than one month and an automatic renewal clause under which the contract will automatically renew for a specified term of more than one month unless the consumer cancels the contract, shall disclose the automatic renewal clause and the procedure by which the consumer can cancel automatic renewal of the consumer contract clearly and conspicuously in the consumer contract.
                (b) Any person who sells or offers to sell any products or services to a consumer pursuant to a consumer contract that has a specified contract term of twelve months or more, under which the contract will automatically renew for a specified term of more than one month unless the consumer cancels the consumer contract, shall notify the consumer clearly and conspicuously:
                (1) That the consumer contract will automatically renew unless the consumer cancels the contract;
                (2) How to cancel the contract; and
                (3) The deadline by which the consumer shall respond to cancel the consumer contract and prevent automatic renewal.
The notice provided to the consumer under this subsection shall be sent to the consumer no less than thirty days and no more than sixty days before the date upon which the consumer shall respond under paragraph (3).
                (c) The notice to the consumer required by this section may be provided electronically if the:
                (1) Transaction for sale of products or services was conducted electronically at the election of the consumer and in compliance with the requirements of chapter 489E, the uniform electronic transactions act; or
                (2) Consumer elects to receive electronic communications and provides a valid electronic-mail address for the purpose of receiving the notice required by this section.
                (d) Any person who knowingly violates this section or who knowingly fails to cancel an automatic renewal contract upon consumer request shall be deemed to have engaged in an unfair method of competition and unfair or deceptive act or practice in the conduct of any trade or commerce within the meaning of section 480-2.
                (e) This section shall not apply to any:
                (1) Financial institution subject to chapter 412 to the extent that the financial institution is engaged in activities regulated pursuant to chapter 412; and
                (2) Insurer subject to chapter 431, 432, or 432D to the extent that the insurer is engaged in activities regulated pursuant to those chapters.
                (f) For purposes of this section:
                "Clearly and conspicuously" means in larger type than the surrounding text; in contrasting type, font, or color to the surrounding text of the same size; or set off from the surrounding text of the same size by symbols or other marks in a manner that clearly calls attention to the language. In the case of an audio disclosure, "clear and conspicuous" and "clearly and conspicuously" mean in a volume and cadence sufficient to be readily audible and understandable.
                "Consumer" shall have the same meaning as in section 480 -1. [L 2011, c 139, §1]


Illinois Automatic Renewal Law

(815 ILCS 601/) Automatic Contract Renewal Act.
 
                (815 ILCS 601/1)
                Sec. 1. Short title. This Act may be cited as the Automatic Contract Renewal Act.
(Source: P.A. 91-674, eff. 6-1-00.)
 
                (815 ILCS 601/5)
                Sec. 5. Definition. In this Act:
                "Contract" means a written agreement between 2 or more parties.
                "Parties" include individuals and other legal entities, but do not include the federal government, this State or another state, a unit of local government, or a school district.
(Source: P.A. 91-674, eff. 6-1-00.)
 
                (815 ILCS 601/10)
                Sec. 10. Automatic renewal; requirements.

                (a) Any person, firm, partnership, association, or corporation that sells or offers to sell any products or services to a consumer pursuant to a contract, where such contract automatically renews unless the consumer cancels the contract, shall disclose the automatic renewal clause clearly and conspicuously in the contract, including the cancellation procedure.

                (b) Any person, firm, partnership, association, or corporation that sells or offers to sell any products or services to a consumer pursuant to a contract, where such contract term is a specified term of 12 months or more, and where such contract automatically renews for a specified term of more than one month unless the consumer cancels the contract, shall notify the consumer in writing of the automatic renewal. Written notice shall be provided to the consumer no less than 30 days and no more than 60 days before the cancellation deadline pursuant to the automatic renewal clause. Such written notice shall disclose clearly and conspicuously:

                (i) that unless the consumer cancels the contract it will automatically renew; and

                (ii) where the consumer can obtain details of the automatic renewal provision and cancellation procedure (for example, by contacting the business at a specified telephone number or address or by referring to the contract).

                (c) A person, firm, partnership, association, or corporation will not be liable for a violation of this Act or the Consumer Fraud and Deceptive Business Practices Act if such person, firm, partnership, association, or corporation demonstrates that, as part of its routine business practice:

                (i) it has established and implemented written procedures to comply with this Act and enforces compliance with the procedures;

                (ii) any failure to comply with this Act is the result of error; and

                (iii) where an error has caused a failure to comply with this Act, it provides a full refund or credit for all amounts billed to or paid by the consumer from the date of the renewal until the date of the termination of the account, or the date of the subsequent notice of renewal, whichever occurs first.

(Source: P.A. 93-950, eff. 1-1-05.)
 
                (815 ILCS 601/15)

                Sec. 15. Violation. A violation of this Act constitutes an unlawful practice under the Consumer Fraud and Deceptive Business Practices Act.

(Source: P.A. 93-950, eff. 1-1-05.)
 
                (815 ILCS 601/20)

                Sec. 20. Applicability.

                (a) This Act does not apply to a contract entered into before the effective date of this Act.

                (b) This amendatory Act of the 93rd General Assembly does not apply to a contract
 entered into before the effective date of this amendatory Act of the 93rd General Assembly.

                (c) This Act does not apply to business-to-business contracts.

                (d) This Act does not apply to banks, trust companies, savings and loan associations, savings banks, or credit unions licensed or organized under the laws of any state or the United States, or any foreign bank maintaining a branch or agency licensed or organized under the laws of any state of the United States, or any subsidiary or affiliate thereof.

                (e) This Act does not apply to a contract that is extended beyond the original term of the contract as the result of the consumer's initiation of a change in the original contract terms.

(Source: P.A. 93-950, eff. 1-1-05.)


North Carolina Automatic Renewal Law

§ 75-41. Contracts with automatic renewal clauses.
 
                (a)           Any person, firm, or corporation engaged in commerce that sells, leases, or offers to sell or lease, any products or services to a consumer pursuant to a contract, where the contract automatically renews unless the consumer cancels the contract, shall disclose the automatic renewal clause clearly and conspicuously in the contract or contract offer.

                 (b)           Any person, firm, or corporation engaged in commerce that sells, leases, or offers to sell or lease, any products or services to a consumer pursuant to a contract, where the contract automatically renews unless the consumer cancels the contract, shall disclose clearly and conspicuously how to cancel the contract in the initial contract, contract offer, or with delivery of products or services.

                (c)            A person, firm, or corporation that fails to comply with the requirements of this section is in violation of this section unless the person, firm, or corporation demonstrates that all of the following are its routine business practice:

                                (1)           It has established and implemented written procedures to comply with this section and enforces compliance with the procedures.

                                (2)           Any failure to comply with this section is the result of error.

                                (3)           Where an error has caused the failure to comply with this section, it provides a full refund or credit for all amounts billed to or paid by the consumer from the date of the renewal until the date of the termination of the contract, or the date of the subsequent notice of renewal, whichever occurs first.

                (d)           This section does not apply to insurers licensed under Chapter 58 of the General Statutes, or to banks, trust companies, savings and loan associations, savings banks, or credit unions licensed or organized under the laws of any state or the United States, or any foreign bank maintaining a branch or agency licensed under the laws of the United States, or any subsidiary or affiliate thereof.

                (e)           A violation of this section renders the automatic renewal clause void and unenforceable. (2007-288, s. 1; 2007-507, s. 17.)


 
Oregon Automatic Renewal Law

Oregon Revised Statutes Chapter 646a; ORS §646A.292 - 646.295

Amended by Oregon SB 487; effective January 1, 2012
 
                646A.292 Legislative intent. It is the intent of the Legislative Assembly to end the practice of ongoing charging of consumer credit or debit cards or third party payment accounts without the consumers' explicit consent for ongoing shipments of a product or ongoing deliveries of service. [2011 c.509 §1]

                646A.293 Definitions for ORS 646A.293 and 646A.295. As used in this section and ORS 646A.295:

                (1) "Automatic renewal" means a plan or arrangement in which a paid subscription or purchasing agreement is automatically renewed at the end of a definite term for a subsequent term.

                (2) "Clear and conspicuous" means in larger type than the surrounding text, or in contrasting type, font or color to the surrounding text of the same size, or set off from the surrounding text of the same size by symbols or other marks, in a manner that clearly calls attention to the language. In the case of an audio disclosure, "clear and conspicuous" means in a volume and cadence sufficient to be readily audible and understandable.

                (3) "Consumer" means any individual who seeks or acquires, by purchase or lease, any goods, services, money or credit for personal, family or household purposes.

                (4) "Continuous service" means a plan or arrangement in which a paid subscription or purchasing agreement continues until the consumer cancels the service.

                (5) "Offer terms" means the following clear and conspicuous disclosures:

                (a) That the subscription or purchasing agreement will continue until the consumer cancels.

                (b) The description of the cancellation policy that applies to the offer.

                (c) The recurring charges that will be charged to the consumer's credit or debit card or payment account with a third party as part of the automatic renewal or continuous service plan or arrangement, and, if the amount of the charge will change, the amount to which the charge will change, if known.

                (d) The length of the automatic renewal term or that the service is continuous, unless the length of the term is chosen by the consumer.

                (e) The minimum purchase obligation, if any.

                (6) "Person" has the meaning given that term in ORS 646.605. [2011 c.509 §2]
 
                646A.295 Prohibited actions; requirements; timing; failure to obtain consent; exceptions. (1) It is unlawful for a person that makes an automatic renewal or continuous service offer to a consumer in this state to do any of the following:

                (a) Fail to present the automatic renewal offer terms or continuous service offer terms in a clear and conspicuous manner before a subscription or purchasing agreement is fulfilled and in visual proximity, or in the case of an offer conveyed by voice, in temporal proximity, to the request for consent to the offer.

                (b) Charge the consumer's credit or debit card or payment account with a third party for an automatic renewal or continuous service without first obtaining the consumer's affirmative consent to the agreement containing the automatic renewal offer terms or continuous service offer terms.

                (c) Fail to provide an acknowledgment that includes the automatic renewal offer terms or continuous service offer terms and information regarding how to cancel in a manner that is capable of being retained by the consumer. If the offer includes a free trial, the person shall also disclose in the acknowledgment how to cancel and allow the consumer to cancel before the consumer pays for the goods or services.

                (2) A person making automatic renewal or continuous service offers shall provide a toll-free telephone number, electronic mail address, a post-office address only when the person directly bills the consumer, or another cost-effective, timely and easy-to-use mechanism for cancellation that must be described in the acknowledgment required by subsection (1)(c) of this section.

                (3) In the case of a material change in the terms of the automatic renewal or continuous service offer that has been accepted by a consumer, the person shall provide the consumer with a clear and conspicuous notice of the material change and provide information regarding how to cancel in a manner that is capable of being retained by the consumer.

                (4) The requirements of this section must be met prior to the completion of the initial order for the automatic renewal or continuous service, except as follows:

                (a) The requirement in subsection (1)(c) of this section may be fulfilled after completion of the initial order.

                (b) The requirement in subsection (3) of this section must be fulfilled prior to implementation of the material change.

                (c) The requirements in subsection (1)(a) and (c) of this section may be fulfilled in the initial billing statement or invoice provided to the consumer when the person directly bills the consumer.

                (5) In the event a person sends goods, wares, merchandise or products to a consumer under a continuous service agreement or pursuant to an automatic renewal of a purchase without first obtaining the consumer's affirmative consent as required in subsection (1) of this section, the goods, wares, merchandise or products shall for all purposes be deemed an unconditional gift to the consumer who may use or dispose of them in any manner the consumer sees fit without any obligation to the person including, but not limited to, requiring the consumer to ship, or bear the cost of shipping, any goods, wares, merchandise or products to the person.

                (6) The following are exempt from the requirements of this section:

                (a) A person that provides a service pursuant to a franchise issued by a political subdivision of the state or a license, franchise, certificate or other authorization issued by the Public Utility Commission of Oregon.

                (b) A person that provides a service regulated by the Public Utility Commission of Oregon, the Federal Communications Commission or the Federal Energy Regulatory Commission.

                (c) A person regulated by the Department of Consumer and Business Services under the Insurance Code.

                (d) A bank, bank holding company, or the subsidiary or affiliate of either, or a credit union or other financial institution or trust company as those terms are defined in ORS 706.008, that is licensed under state or federal law.

                (e) A person that is regulated as a service contract seller under ORS 646A.150 to 646A.172.

                (f) A consumer finance company licensed under ORS chapter 725.

                (g) A person that provides direct-to-home satellite services subject to regulation by the Federal Communications Commission. [2011 c.509 §3]
 

Automatic Renewal Laws Covering Service Contracts Only
 
Florida Automatic Renewal Law

Florida Statutes §501.165: Automatic Renewal of Service Contracts
 
501.165 Automatic RENEWAL of SERVICE CONTRACTS.-

                (1) DEFINITIONS.-As used in this section:

                (a) "Automatic RENEWAL provision" means a provision under which a SERVICE contract is renewed for a specified period of more than 1 month if the RENEWAL causes the SERVICE contract to be in effect more than 6 months after the day of the initiation of the SERVICE contract. Such RENEWAL is effective unless the consumer gives notice to the seller of the consumer's intention to terminate the SERVICE contract.

                (b) "Consumer" means an individual, as defined in s. 501.603, receiving SERVICE, maintenance, or repair under a SERVICE contract. The term does not include an individual engaged in business or employed by or otherwise acting on behalf of a governmental entity if the individual enters into the SERVICE contract as part of or ancillary to the individual's business activities or on behalf of the business or governmental entity.

                (c) "Seller" means any person, firm, partnership, association, or corporation engaged in commerce that sells, leases, or offers to sell or lease any SERVICE to a consumer pursuant to a SERVICE contract.

                (d) "Service contract" means a written contract for the performance of SERVICES over a fixed period of time or for a specified duration.

                (2) SERVICE CONTRACTS WITH AUTOMATIC RENEWAL PROVISIONS.-

                (a) Any seller that sells, leases, or offers to sell or lease any SERVICE to a consumer pursuant to a SERVICE contract that has an AUTOMATIC RENEWAL provision, unless the consumer cancels that contract, shall disclose the AUTOMATIC RENEWAL provision clearly and conspicuously in the contract or contract offer.

                (b) Any seller that sells or offers to sell any SERVICE to a consumer pursuant to a SERVICE contract the term of which is a specified period of 12 months or more and that AUTOMATICally renews for a specified period of more than 1 month, unless the consumer cancels the contract, shall provide the consumer WITH written or electronic notification of the AUTOMATIC RENEWAL provision. Notification shall be provided to the consumer no less than 30 days or no more than 60 days before the cancellation deadline pursuant to the AUTOMATIC RENEWAL provision. Such notification shall disclose clearly and conspicuously:

                1. That unless the consumer cancels the contract the contract will AUTOMATICally renew.

                2. Methods by which the consumer may obtain details of the AUTOMATIC RENEWAL provision and cancellation procedure, whether by contacting the seller at a specified telephone number or address, by referring to the contract, or by any other method.

                (c) A seller that fails to comply WITH the requirements of this subsection is in violation of this subsection unless the seller demonstrates that:

                1. As part of the seller's routine business practice, the seller has established and implemented written procedures to comply WITH this section and enforces compliance WITH the procedures;

                2. Any failure to comply WITH this subsection is the result of error; and

                3. As part of the seller's routine business practice, where an error has caused the failure to comply WITH this subsection, the unearned portion of the contract subject to the AUTOMATIC RENEWAL provision is refunded as of the date on which the seller is notified of the error.
            
(d) This subsection does not apply to:

                1. A financial institution as defined in s. 655.005(1)(h) or any depository institution as defined in 12 U.S.C. s. 1813(c)(2).

                2. A foreign bank maintaining a branch or agency licensed under the laws of any state of the United States.

                3. Any subsidiary or affiliate of an entity described in subparagraph 1. or subparagraph 2.

                4. A health studio as defined in s. 501.0125(1).

                5. Any entity licensed under chapter 624, chapter 627, chapter 634, chapter 636, or chapter 641.

                6. Any electric utility as defined in s. 366.02(2).

                7. Any private company as defined in s. 180.05 providing SERVICEs described in chapter 180 that is competing against a governmental entity or has a governmental entity providing billing SERVICEs on its behalf.

                (e) A violation of this subsection renders the AUTOMATIC RENEWAL provision void and unenforceable.
 
 

New Mexico Automatic Renewal Law
New Mexico Administrative Code §12.2.11:  Automatic Renewal of Service Contracts
 
12.2.11.1              ISSUING AGENCY: Office of the New Mexico Attorney General.
[12.2.11.1 NMAC - N, 9/15/09]
 
12.2.11.2              SCOPE: Service contracts which contain automatic renewal clauses.
[12.2.11.2 NMAC - N, 9/15/09]
 
12.2.11.3              STATUTORY AUTHORITY:The New Mexico Unfair Practices Act, NMSA 1978, Section 57-12-1, et seq. (1967).
[12.2.11.3 NMAC - N, 9/15/09]
 
12.2.11.4              DURATION: Permanent.
[12.2.11.4 NMAC - N, 9/15/09]
 
12.2.11.5              EFFECTIVE DATE: September 15, 2009, unless a later date is cited at the end of a section.
[12.2.11.5 NMAC - N, 9/15/09]
 
12.2.11.6              OBJECTIVE: The purpose of this rule is to deter unfair and deceptive practices that result in economic harm to consumers in transactions involving service contracts which contain automatic renewal clauses.
[12.2.11.6 NMAC - N, 9/15/09]
 
12.2.11.7              DEFINITIONS:
                A.             "Automatic renewal provision" means a provision under which a service contract is renewed for a specified period if:
                                (1)           the renewal causes the service contract to continue in effect more than two months after the end of the term of the original contract; and
                                (2)          the renewal is effective unless the consumer gives notice to the seller of the consumer's intention to terminate the service contract.
                B.             "Seller" means a person providing service, maintenance, or repair under a service contract.
                C.             "Service contract" means any contract for service, maintenance or repair.
[12.2.11.7 NMAC - N, 9/15/09]
 
12.2.11.8              AUTOMATIC CANCELLATION PROVISIONS:
                A.             It is an unfair or deceptive trade practice for any consumer service contract to contain an automatic renewal provision unless the contract provision is set forth in a clear and conspicuous manner in at least 10 point type and includes the notice requirements and specific procedure by which the consumer may cancel the contract at the end of the initial contract term and the terms of the automatic renewal in the event that notice of cancellation is not given at the end of the initial contract term;
                B.             It is an unfair or deceptive trade practice for any consumer service contract to contain an automatic renewal provision unless the seller provides the consumer written notice prior to the end of the initial term of the contract or prior to the end of any renewal term of the contract consistent with Subsection (C) of 12.2.11.8 NMAC herein.
                C.             It is an unfair and deceptive trade practice for any service contract that contains an automatic renewal provision to:
                                (1)          fail to provide written notice to the consumer specifying the procedure by which the consumer may cancel the contract and set forth in a clear and conspicuous manner, in at least 10 point type, and served on the consumer either by certified mail or on the first page of a monthly statement at least 30 days before the last day on which the consumer may give notice of the consumer's intention to terminate the contract, but not sooner than 60 days before the last day on which the consumer may give notice;
                                (2)           fail to allow a minimum of thirty (30) calendar days after the receipt of the seller's notice pursuant to Paragraph (1) of Subsection C of 12.2.11.8 NMAC herein for the consumer to give notice of the consumer's intent to terminate the contract at the end of the initial term or at the end of any additional renewal term;
                                (3)           fail to honor a written notice sent via fax, U.S. mail, email or any other means upon which a consumer can reasonably rely to deliver such notice and postmarked, time stamped or otherwise electronically date stamped within the 30 calendar days provided for the consumer to give notice;
                                (4)           fail to honor a written notice timely sent, mailed, emailed or otherwise transmitted in a manner upon which the consumer can reasonably rely to deliver such notice but received by the seller after the expiration of the notice period;
                                (5)           fail to allow termination of the contract at the end of the initial term or at the end of any additional renewal term without additional cost or penalty.
[12.2.11.8 NMAC - N, 9/15/09]
 
12.2.11.9              SEVERABILITY: If any portion of this rule is held invalid, the remainder of the rule and application thereof shall remain unaffected.
[12.2.11.9 NMAC - N, 9/15/09]
 
 
Utah Automatic Renewal Law

Utah Code Title 15, Chapter 10:  Service Contracts Act

Amended by 2011 Utah HB 194; effective July 1, 2011
 
15-10-101.  Title.

This chapter is known as the "Service Contracts Act."
 
15-10-102.   Definitions.

As used in this chapter:

(1) "Automatic renewal provision" means a provision under which a service contract is renewed for one or more specified periods if:

(a) the renewal causes the service contract to be in effect more than six months after the day of the initiation of the service contract; and

(b) the renewal is effective unless the consumer gives notice to the seller of the consumer's intention to terminate the service contract.

(2) "Business consumer" means a person engaged in business if the person enters into a service contract as part of the person's business activities.

(3) (a) "Consumer" means a person receiving service, maintenance, or repair under a service contract.

(b) "Consumer" includes a representative of an association subject to:

(i) Title 57, Chapter 8, Condominium Ownership Act; or

(ii) Title 57, Chapter 8a, Community Association Act.

(4) "Seller" means a person providing service, maintenance, or repair under a service contract .

(5) (a) "Service contract" means a contract for service, maintenance, or repair:

(i) in connection with real property; or

(ii) that provides a benefit to the real property.

(b) "Service contract" does not include a contract affecting any right, title, estate, or interest in real property, including:

(i) a fee title interest;

(ii) a leasehold interest;

(iii) an option contract relating to real property;

(iv) a real estate purchase contract;

(v) an easement; or

(vi) any other real property interest governed by Title 57, Real Estate.
 
15-10-201.   Notice requirement.

(1) Except as provided in Subsection (1)(b), a service contract may not contain an automatic renewal provision unless the seller provides the consumer written notice complying with Subsection (2) that informs the consumer of the automatic renewal provision.

(2) (a) For a service contract executed on or after July 1, 2011, that exceeds 12 months for a renewal period, a seller shall provide written notice of an automatic renewal provision prominently displayed on the first page of the service contract.

(b) In addition to complying with Subsection (2)(a), a seller shall provide written notice required under Subsection (1) to the consumer:

(i) personally;

(ii) by certified mail; or

(iii) prominently displayed on the first page of a monthly statement.

(c) (i) A seller shall provide written notice under Subsection (2)(b):

(A) no later than 30 calendar days before the last day on which the consumer may give notice of the consumer's intention to terminate the service contract; and

(B) no sooner than 90 calendar days before the last day on which the consumer may give notice of the consumer's intention to terminate the service contract.

(ii) A seller may not provide written notice required under Subsection (1) except:

(A) as provided in Subsection (2)(a); or

(B) during the time period described in Subsection (2)(c)(i).

(d) Written notice required under Subsection (1) shall be:

(i) written in clear and understandable language; and

(ii) printed in an easy-to-read type size and style.
 
15-10-202.   Remedy for violation.

(1) Subject to Subsection (2), if a seller does not comply with Section 15-10-201 with respect to a service contract containing an automatic renewal provision:

(a) the automatic renewal provision is void and unconscionable as a matter of public policy; and

(b) th e service contract shall automatically renew on a month-to-month basis.

(2) Subsection (1) applies to an automatic renewal provision in a service contract with a business consumer for which a seller does not comply with Section 15-10-201 only if the service contract is executed on or after July 1, 2011.
 
15-10-301.   Exemptions.

This chapter does not apply to a contract made pursuant to Title 11, Chapter 13, Interlocal Cooperation Act.
 
 
Covering Consumer Alarm / Security Contracts Only
 
Arkansas Automatic Renewal Law

Arkansas Code Title 4, Subtitle 7, Ch 86-106:   §4-86-106. Automatic renewal of professional home security contracts prohibited.
 
(a) Except as provided in subsection (c) of this section, no professional home security services contract that is entered into after August 1, 2003, shall state that the term of the professional home security services contract will automatically be renewed for any additional period beyond the initial term of the professional home security services contract.

(b) Except as provided in subsection (c) of this section, no professional home security services contract under subsection (a) of this section shall be renewed for any additional period beyond the initial term of the professional home security services contract unless the person receiving the professional home security services affirmatively notifies the person offering the professional home security services that he or she wishes to renew the professional home security services contract.

(c)            (1) A provider of professional home security services and a person may enter into a professional home security services contract that has a fixed initial term and successive, automatic monthly renewal terms.

                (2) If the professional home security services contract contains a renewal clause as described in subdivision (c)(1) of this section, then:

                                (A) The professional home security services contract shall conspicuously state that the person receiving the professional home security services has the right without additional cost or penalty to terminate the professional home security services contract at the end of the initial term or the then current renewal; and

                                (B) The person shall provide the provider of the professional home security services with notice of his or her intent to terminate by written notice at least thirty (30) days before the expiration of the initial term or the then current renewal term.

(d) This section does not affect the initial term of a professional home security services contract under subsection (a) of this section and does not prohibit any person from offering to renew a professional home security services contract under subsection (a) of this section.

(e) If a professional home security services contract under this section is renewed in violation of this section, the person receiving the professional home security services may without additional cost or penalty immediately terminate the professional home security services contract by giving a written termination notice to the provider and shall not be obligated to perform under the professional home security services contract as renewed.

History.
Acts 2003, No. 1344, § 1; 2007, No. 439, § 1.
 

Tennessee Automatic Renewal Law

Tennessee Code § 62-32-325:   Automatic Renewal Clauses - Cancellation during automatic renewal period.
 
(a) A contract having an automatic renewal clause between an alarm systems contractor and any homeowner or renter for the provision of alarm services may automatically be renewed for a period not to exceed one (1) year at a time. Any waiver of the renewal limitation period included in the contract shall be void as contrary to public policy.
 
(b) At any time during an automatic renewal period provided by contract in accordance with subsection (a), a party to the contract who is being relocated to a hospital, nursing home or assisted living facility may cancel the contract by giving thirty (30) days' written notice to the alarms system contractor.

[Acts 2009, ch. 565, § 1.]


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Barry S. Marks   
Direct:  205.251.8303 │ barry@leaselawyer.com
 
Matthew D. Evans   
Direct:  205.251.8302  │ matt@leaselawyer.com
 


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