HB0522CPS

HOUSE CONSUMER AND PUBLIC AFFAIRS COMMITTEE SUBSTITUTE FOR

HOUSE BILL 522

54th legislature - STATE OF NEW MEXICO - first session, 2019

AN ACT

RELATING TO CONSUMER PROTECTION; DECLARING AS AN UNLAWFUL PRACTICE THE AUTOMATIC RENEWAL OF CONSUMER CONTRACTS OR CONTINUATION OF DELIVERY OF PRODUCTS OR SERVICES WITHOUT PRIOR CONSUMER CONSENT; REQUIRING CERTAIN DISCLOSURES IN OFFERS TO RENEW CONTRACTS FOR AND CONTINUE DELIVERY OF PRODUCTS OR SERVICES TO CONSUMERS; REQUIRING THAT CONSUMERS BE PROVIDED WITH AN OPTION TO TERMINATE THOSE CONTRACTS OR TO CONTINUE DELIVERIES; EXTENDING THE PERIOD IN WHICH A HOLDER OF A SERVICE CONTRACT MAY OBTAIN A REFUND.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

SECTION 1. A new section of the Unfair Practices Act is enacted to read:

"[NEW MATERIAL] RENEWAL AND CONTINUOUS DELIVERY CONTRACTS--REQUIREMENTS--REMEDIES FOR VIOLATIONS.--

A. It is an unlawful practice within the meaning of the Unfair Practices Act for a person to renew a contract for or continue delivery of a product or service to a consumer after the expiration of the term of the contract, including after a free trial, discount or other introductory offer, without:

(1) obtaining the consumer's prior explicit consent; provided that for an offer to:

(a) renew a contract for or continue delivery of a product or service, the offer shall be provided to the consumer not more than sixty days, and not less than thirty days, prior to the expiration date of the term of the contract for delivery of the product or service; and

(b) continue delivery of a product or service upon the expiration of a free trial, discount or other introductory offer period, the offer shall be provided to the consumer not more than ten days, and not less than five days, prior to the date of expiration; and

(2) simultaneously:

(a) presenting to the consumer 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: 1) clear instructions to the consumer on how to cancel the contract for or continued delivery of the product or service, including a toll-free telephone number, electronic mail address and postal address, if the person directly bills the consumer, for cancellation, and if a person makes and the consumer accepts the offer online, instructions on how the consumer may terminate the contract or continuous service offer online; 2) the recurring charges that will be charged to the consumer's credit or debit account or payment account with a third party as a result of accepting the offer; 3) the length of the term of delivery of the product or service; and 4) the minimum purchase obligation, if any; and

(b) in the case of an audio disclosure, providing to the consumer the terms listed in Subparagraph (a) of this paragraph in a volume and cadence sufficient to be readily audible and understandable to the consumer prior to the consumer's consent.

B. If a person violates a provision of this section, in addition to any other remedy provided pursuant to the Unfair Practices Act, the product or service that is the subject of a contract or continued delivery shall be deemed an unconditional gift to the consumer. The consumer may use or dispose of the product or service in any manner without any obligation to that person."

SECTION 2. Section 59A-58-2 NMSA 1978 (being Laws 2001, Chapter 206, Section 2, as amended) is amended to read:

"59A-58-2. DEFINITIONS.--As used in the Service Contract Regulation Act:

A. "administrator" means a person who is responsible for administering a service contract that is issued, sold or offered for sale by a provider or sold by a seller;

B. "consumer" means a person who purchases, other than for resale, property used primarily for personal, family or household purposes and not for business or research purposes;

C. "holder" means a resident of this state who:

(1) purchases a service contract; or

(2) is legally in possession of a service contract and is entitled to enforce the rights of the original purchaser of the service contract;

D. "incidental costs" means expenses specified in a warranty that are incurred by the warranty holder due to the failure of the product to perform as provided in the contract. Incidental costs may include, without limitation, insurance policy deductibles, rental vehicle charges, the difference between the actual value of a motor vehicle at the time of failure and the cost of a replacement vehicle, gross receipts taxes, registration fees, transaction fees and mechanical inspection fees. Incidental costs may be reimbursed in either a fixed amount specified in the warranty or by use of a formula itemizing specific incidental costs incurred by the warranty holder;

E. "maintenance agreement" means a contract for a limited period that provides only for scheduled maintenance;

F. "major manufacturing company" means a person who:

(1) manufactures or produces and sells products under its own name or label or is a wholly owned subsidiary or affiliate of the person who manufactures or produces products; and

(2) maintains, or its parent company maintains, a net worth or stockholders' equity of at least one hundred million dollars ($100,000,000);

G. "property" means all property, whether movable at the time of purchase or a fixture, that is used primarily for personal, family or household purposes;

H. "provider" means a person who is contractually obligated to a holder or to indemnify the holder for the costs of repairing, replacing or performing maintenance on property;

I. "reimbursement insurance policy" means a policy of insurance issued to a provider to either provide reimbursement to the provider under the terms of the insured service contracts issued or sold by the provider or, in the event of the provider's non-performance, to pay on behalf of the provider all covered contractual obligations incurred by the provider under the terms of the insured service contracts issued or sold by the provider;

J. "renewal provision" means a provision within a service contract that acts to renew the service contract after the end of the original term for a renewal term greater than two months, and such renewal is not effective unless the holder gives notice to the provider or administrator of the holder's intention to review the service contract;

[J.] K. "road hazard" means a hazard that is encountered while driving a motor vehicle and that may include potholes, rocks, wood debris, metal parts, glass, plastic, curbs or composite scraps;

[K.] L. "seller" means a person who sells service contracts that contractually obligate another party or parties;

[L.] M. "service contract" means a contract pursuant to which a provider, in exchange for separately stated consideration, is obligated for a specified period to a holder to repair, replace or perform maintenance on, or indemnify or reimburse the holder for the costs of repairing, replacing or performing maintenance on, property that is described in the service contract and that has an operational or structural failure as a result of a defect in materials, workmanship or normal wear and tear, including a contract that provides or includes one or more of the following:

(1) incidental payment of indemnity under limited circumstances, including towing, rental and emergency road service and food spoilage;

(2) the repair, replacement or maintenance of property for damages that result from power surges or accidental damage from handling;

(3) the repair or replacement of tires and wheels on a motor vehicle damaged as a result of coming into contact with road hazards;

(4) the removal of dents, dings or creases on a motor vehicle that can be repaired using the process of paintless dent removal without affecting the existing paint finish and without replacing vehicle body panels, sanding, bonding or painting;

(5) the repair of chips or cracks in motor vehicle windshields or the replacement of motor vehicle windshields as a result of damage caused by road hazards;

(6) the replacement of a motor vehicle key or key fob in the event the key or key fob becomes inoperable or is lost or stolen; and

(7) other services approved by the superintendent if not inconsistent with other provisions of the Service Contract Regulation Act; and

[M.] N. "warranty" means a warranty provided solely by a manufacturer, importer or seller of property for which the manufacturer, importer or seller did not receive separate consideration and that:

(1) is not negotiated or separated from the sale of the property;

(2) is incidental to the sale of the property; and

(3) guarantees to indemnify the consumer for defective parts, mechanical or electrical failure, labor or other remedial measures required to repair or replace the property and may provide specified incidental costs."

SECTION 3. Section 59A-58-9 NMSA 1978 (being Laws 2001, Chapter 206, Section 9) is amended to read:

"59A-58-9. RIGHT OF HOLDER TO RETURN SERVICE CONTRACT FOR REFUND.--

A. A service contract is void and a provider shall refund to the holder the purchase price of the service contract if the holder has not made a claim under the service contract and the holder returns the service contract to the provider:

(1) within twenty days after the date the

provider mails a copy of the service contract to the holder;

(2) within ten days after the purchaser receives a copy of the service contract if the provider furnishes the holder with the copy at the time the contract is purchased; or

(3) within a longer period specified in the

service contract.

B. The right of a holder to return a service contract pursuant to Subsection A of this section applies only to the original purchaser of the service contract.

C. Subsequent to the time period specified in Subsection A of this section, or if a claim was made during that time period, a holder may cancel a service contract and the provider shall refund to the contract holder one hundred percent of the unearned pro rata provider fee, less any claims paid. The provider shall not charge any additional fee.

[C.] D. A service contract must include a provision that clearly states the right of a holder to return a service contract pursuant to this section. Notwithstanding Subsection C of this section, a provider is not required to deduct the amount of any claims paid under a service contract from the amount of a refund a holder is entitled to.

[D.] E. The provider shall refund to the holder or credit to the account of the holder the purchase price of the service contract within sixty days after a service contract is returned pursuant to Subsection A of this section. If the provider fails to refund the purchase price or credit the account of the holder within that time, the provider shall pay the holder a penalty of ten percent of the purchase price for each thirty-day period or portion thereof that the refund and any accrued penalties remain unpaid."

SECTION 4. A new section of the Service Contract Regulation Act is enacted to read:

"[NEW MATERIAL] RENEWAL--NOTICE.--

A. A provider shall not include a renewal provision within a service contract offered in this state unless the renewal provision explicitly states that no renewal of the service contract beyond the expiration date of the contract is effective without:

(1) obtaining the holder's prior explicit consent; provided that for an offer to renew a contract for or continue delivery of a service, the offer shall be provided to the holder not more than sixty days, and not less than thirty days, prior to the expiration date of the term of the contract for delivery of the service; and

(2) simultaneously:

(a) presenting to the holder 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: 1) clear instructions to the holder on how to cancel the contract for the service, including a toll-free telephone number, electronic mail address and postal address, if the person directly bills the holder, for cancellation, and if a person makes and the holder accepts the offer online, instructions on how the holder may terminate the contract or continuous service offer online; 2) the recurring charges that will be charged to the holder's credit or debit account or payment account with a third party as a result of accepting the offer; 3) the length of the term of delivery of the service; and 4) the minimum purchase obligation, if any; and

(b) in the case of an audio disclosure, providing to the holder the terms listed in Subparagraph (a) of this paragraph in a volume and cadence sufficient to be readily audible and understandable to the holder prior to the holder's consent.

B. If a person violates a provision of this section, in addition to any other remedy provided pursuant to the Service Contract Regulation Act, the service that is the subject of a contract or continued delivery shall be deemed an unconditional gift to the holder. The holder may use or dispose of the service in any manner without any obligation to that person."

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