Bill S576-2011

Requires disclosure of early termination fees

Requires disclosure of early termination fees.

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  • Jan 4, 2012: REFERRED TO CONSUMER PROTECTION
  • Jan 5, 2011: REFERRED TO CONSUMER PROTECTION

Memo

BILL NUMBER:S576

TITLE OF BILL: An act to amend the general business law, in relation to the disclosure of early termination fees

PURPOSE OR GENERAL IDEA OF BILL: The bill requires that multi-channel video programming distributors (which includes cable operators and satellite providers) disclose early termination fees in a clear and conspicuous manner, with the fee presented with the same prominence as the sales price for programming. The bill also prevents the charging of an early termination fee that isn't prorated. Therefore, the longer a customer has a contract the smaller an early termination fee they would pay. A multichannel video programming distributor that does not adhere to the provisions of this bill would lose their ability to assess an early termination fee.

SUMMARY OF SPECIFIC PROVISIONS: Amends the general business law to add a new section 390-d providing that:

* multichannel video programming distributors disclose early termination fees in a clear and conspicuous manner, with the fee presented with the same prominence as the sales price for programming. * all early termination fees are prorated. * a multichannel video programming distributor that does not adhere to the provisions of this bill would lose their ability to assess an early termination fee.

JUSTIFICATION: Contract cancellation fees are commonly used by service industries such as subscription cable and satellite television, where they are more specifically known as early cancellation fees (ECFS). For example, a customer who purchases cable TV service may sign a two-year contract and be assessed a $200 fee if the customer breaks the contract. These fees are often assessed no matter when the customer breaks the contract, whether it be early in the term or much later in the contract. Fees are not prorated to account for the point during which the contract is broken.

Additionally, particular companies require subscribers to extend their service agreements when new equipment like a receiver is provided. These contract extensions are often hidden, buried in the fine print on the back of brochures provided to the consumer. Furthermore, customers who cancel service within the extended contract period triggered by receiving new equipment like a receiver incur early cancellation fees, no matter how long they were customers prior to receiving the new equipment.

In the past 3 years, over 20,000 complaints regarding ECFs have been filed with the Better Business Bureau. Consumer interest groups have

criticized such fees as discouraging competitiveness because they prevent users from migrating to superior services.

As described above, this legislation requires cable and satellite companies to disclose any early cancellation fee associated with an advertised price in the same prominence as the statement of price. For example, the early cancellation fee would be equal in font size and positioning as the advertised price in a print advertisement. The bill also requires all early cancellation fees to be prorated. No longer will a consumer pay the same rate for a cancellation fee whether they exit an agreement within the first or final month. Finally, companies not following these provisions will be forbidden from assessing early termination fees.

LEGISLATIVE HISTORY: 2010 - S.6182 - Referred Consumer Protection

FISCAL IMPLICATIONS: No costs to the state.

EFFECTIVE DATE: This act shall take effect on the one hundred eightieth day after it shall have become a law.


Text

STATE OF NEW YORK ________________________________________________________________________ 576 2011-2012 Regular Sessions IN SENATE (PREFILED) January 5, 2011 ___________
Introduced by Sen. KLEIN -- read twice and ordered printed, and when printed to be committed to the Committee on Consumer Protection AN ACT to amend the general business law, in relation to the disclosure of early termination fees THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. The general business law is amended by adding a new section 390-d to read as follows: S 390-D. EARLY TERMINATION FEE DISCLOSURE. 1. FOR PURPOSES OF THIS SECTION: (A) "EARLY TERMINATION FEE" MEANS ANY CHARGE OR FEE THAT IS PROVIDED FOR IN A CONTRACT OR AGREEMENT, INCLUDING ANY CONTRACT RENEWAL OR EXTEN- SION, THAT INCLUDES THE PROVISION OF VIDEO PROGRAMMING AND IS ASSESSED AGAINST A SUBSCRIBER WHEN A SUBSCRIBER TERMINATES FOR ANY REASON VIDEO PROGRAMMING SERVICE PRIOR TO THE END OF THE CONTRACT OR AGREEMENT. (B) "CONDITIONAL SALES PRICE" MEANS ANY PRICE FOR A SERVICE THAT INCLUDES VIDEO PROGRAMMING AND WHICH IS AVAILABLE PURSUANT TO AN AGREE- MENT THAT INCLUDES AN EARLY TERMINATION FEE. (C) "MULTICHANNEL VIDEO PROGRAMMING DISTRIBUTOR" SHALL HAVE THE MEAN- ING AS SET FORTH IN 47 U.S.C. SECTION 522 (13). (D) "VIDEO PROGRAMMING" SHALL HAVE THE MEANING AS SET FORTH IN 47 U.S.C. SECTION 522 (20). 2. NO MULTICHANNEL VIDEO PROGRAMMING DISTRIBUTOR THAT PROMOTES A CONDITIONAL SALES PRICE FOR SERVICES THAT INCLUDE VIDEO PROGRAMMING SHALL, IN CONNECTION WITH SUCH PRICE, REQUIRE THAT A SUBSCRIBER BE SUBJECT TO AN EARLY TERMINATION FEE UNLESS SUCH FEE AND THE TERMS UNDER WHICH IT IS TO APPLY ARE DISCLOSED IN A CLEAR AND CONSPICUOUS MANNER AS FOLLOWS: (A) IN ANY MEDIUM USED BY THE MULTICHANNEL VIDEO PROGRAMMING DISTRIBU- TOR TO PROMOTE A CONDITIONAL SALES PRICE, THE EXISTENCE AND AMOUNT OF
ANY EARLY TERMINATION FEE AND THE TERMS UNDER WHICH IT IS TO APPLY SHALL BE DISCLOSED WITH THE SAME PROMINENCE AND IN THE SAME LOCATION AS THE CONDITIONAL SALES PRICE. (B) IN ANY SOLICITATION THAT MAY RESULT IN AN ORDER FOR VIDEO PROGRAM- MING SUBJECT TO A CONDITIONAL SALES PRICE, WHICH FOR THE PURPOSES OF THIS SUBDIVISION SHALL INCLUDE THE DESCRIPTION OF SERVICES, THE MULTI- CHANNEL VIDEO PROGRAMMING DISTRIBUTOR SHALL INFORM POTENTIAL CUSTOMERS OF ANY EARLY TERMINATION FEE AND ITS AMOUNT AND THE TERMS UNDER WHICH IT IS TO APPLY PRIOR TO SALE. 3. ANY EARLY TERMINATION FEE THAT IS ASSESSED IN CONNECTION WITH THE TERMINATION OF A SERVICE SUBJECT TO A CONDITIONAL SALES PRICE MAY NOT BE GREATER THAN THE PRO RATA SHARE OF SUCH FEE UNDER AN AGREEMENT OR CONTRACT CALCULATED AS FOLLOWS: THE FRACTIONAL EQUIVALENT TO THE NUMBER OF MONTHS IN THE AGREEMENT TERM THAT HAVE ELAPSED DIVIDED BY THE TOTAL NUMBER OF MONTHS IN THE AGREEMENT TERM, MULTIPLIED BY THE AMOUNT OF THE EARLY TERMINATION FEE DISCLOSED PURSUANT TO SUBDIVISION TWO OF THIS SECTION. 4. A MULTICHANNEL VIDEO PROGRAMMING DISTRIBUTOR THAT FAILS TO PROVIDE NOTICE AS REQUIRED IN SUBDIVISION TWO OF THIS SECTION OR FAILS TO ASSESS AN EARLY TERMINATION FEE IN ACCORDANCE WITH SUBDIVISION THREE OF THIS SECTION SHALL BE PROHIBITED FROM ENFORCING AN EARLY TERMINATION FEE IN CONNECTION WITH THE TERMINATION OF SERVICE SUBJECT TO A CONDITIONAL SALES PRICE. FOR THE PURPOSES OF THIS SUBDIVISION, "ENFORCEMENT" SHALL INCLUDE ANY REFERENCE, WHETHER WRITTEN OR VERBAL AND IN ANY MEDIUM, TO AN EARLY TERMINATION FEE WITH REGARD TO IMPOSING, NEGOTIATING OR WAIVING AN EARLY TERMINATION FEE, AS AN INDUCEMENT TO RENEW, EXTEND OR ENTER INTO AN AGREEMENT, OR RESOLVE ANY DISPUTE BETWEEN A CONSUMER AND A MULTICHANNEL VIDEO PROGRAMMING DISTRIBUTOR, ITS AGENTS, OR ANY PERSON ATTEMPTING TO RESOLVE A DEBT BASED UPON AN EARLY TERMINATION FEE UNDER THIS SUBDIVISION. 5. ANY VIOLATION OF THIS SECTION SHALL BE DEEMED A DECEPTIVE ACT OR PRACTICE PURSUANT TO SECTION THREE HUNDRED FORTY-NINE OF THIS CHAPTER. NOTHING IN THIS SECTION SHALL IN ANY WAY LIMIT THE RIGHTS OR REMEDIES THAT ARE OTHERWISE AVAILABLE TO A CONSUMER OR PURCHASER UNDER ANY OTHER LAW. S 2. This act shall take effect on the one hundred eightieth day after it shall have become a law.

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