81R382 ATP-D
By: Howard of Fort Bend H.B. No. 2672
A BILL TO BE ENTITLED
AN ACT
relating to restrictions on the automatic renewal of contracts.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Title 12, Business & Commerce Code, is amended by
adding Chapter 606 to read as follows:
CHAPTER 606. AUTOMATIC RENEWAL OF CONTRACTS
Sec. 606.001. APPLICABILITY. (a) This chapter applies
only to the renewal of a contract if:
(1) the original contract term is for six months or
more and the contract automatically renews for a term of at least
one month; or
(2) the price for goods or services under the contract
as renewed is greater than the price of goods or services under the
contract during the immediately preceding contract term.
(b) This chapter does not apply to a contract:
(1) with:
(A) a governmental entity;
(B) a bank, trust company, savings bank, savings
and loan association, credit union, insurance company, or health
maintenance organization organized under the laws of any state or
the United States;
(C) an electric utility, as defined by Section
31.002, Utilities Code, if the contract is for electricity services
subject to rate tariffs approved by the Public Utility Commission
of Texas;
(D) a gas utility, if the contract is for natural
gas service subject to Subchapter B, Chapter 104, Utilities Code;
or
(E) a telecommunications utility, as defined by
Section 606.002, Utilities Code;
(2) that has an original contract term of six months or
more and automatically renews for a term of at least one month, if
the consumer:
(A) may cancel the contract after the original
contract term has expired without penalty; and
(B) is required to pay only a prorated amount for
the portion of the month before the consumer canceled the contract;
or
(3) for the sale, lease, or management of real
property.
Sec. 606.002. DEFINITIONS. In this chapter:
(1) "Automatic renewal clause" means a provision of a
contract that extends the term of or renews a contract if the
consumer does not take a specified action.
(2) "Consumer" means a person who acquires goods or
services for personal, family, or household purposes.
(3) "Seller" means a person who provides a service or
sells goods.
Sec. 606.003. REQUIREMENTS FOR AUTOMATIC RENEWAL. If a
contract between a seller and a consumer contains an automatic
renewal clause, the seller shall:
(1) for a contract described by Section 606.001(a)(1),
clearly and conspicuously disclose to the consumer the automatic
renewal clause and the procedure for canceling the automatic
renewal:
(A) at the time that the seller enters into the
contract with the consumer; or
(B) in writing not later than the 60th day after
the date the seller enters into the contract with the consumer; and
(2) give the consumer written notice of the automatic
renewal clause and the procedure for canceling the automatic
renewal not before the 90th day and not after the 15th day before
the last date on which the consumer may cancel the automatic
renewal.
Sec. 606.004. NOTICE OF AUTOMATIC RENEWAL. (a) Written
notice provided under Section 606.003(2) must clearly and
conspicuously disclose:
(1) that the contract will automatically renew if the
consumer does not cancel the automatic renewal;
(2) the cancellation procedure;
(3) a facsimile number that a consumer may contact to
cancel the automatic renewal; and
(4) the dates during which the consumer may cancel the
automatic renewal.
(b) A seller may opt to send to a consumer written notice
under Section 606.003(2) by mail, certified mail, or personal
service, or by including a statement in an invoice as provided by
Subsection (c). The seller may assume that written notice
deposited with the United States Postal Service with first class
postage paid will be received by the consumer on the third federal
business day after the notice is so deposited.
(c) Notice included in an invoice must be in red ink or in
boldfaced type large enough to be easily noticed.
Sec. 606.005. CANCELLATION OF AUTOMATIC RENEWAL BY
FACSIMILE. A seller shall allow a consumer to cancel the automatic
renewal of a contract by contacting a facsimile number provided by
the seller.
Sec. 606.006. CONSUMER'S RIGHT TO CANCEL. (a) A consumer
may cancel the automatic renewal of a contract at any time before
the beginning of the automatic renewal period, at no cost to the
consumer, by following the procedure set out in the disclosure and
notice provided under Sections 606.003 and 606.004.
(b) If the seller fails to provide either the disclosure
under Section 606.003(1), if required, or the notice required by
Section 606.003(2), the consumer may cancel the automatic renewal
by any reasonable means at any time, at no cost to the consumer.
(c) If a consumer cancels the automatic renewal as provided
by this section, the seller must cancel the automatic renewal with
no additional cost to the consumer.
Sec. 606.007. DECEPTIVE TRADE PRACTICE. (a) Except as
provided by Subsection (b), a violation of this chapter is a false,
misleading, or deceptive act or practice as defined by Section
17.46(b), and any remedy under Subchapter E, Chapter 17, is
available for a violation of this chapter.
(b) A violation of this chapter is not a false, misleading,
or deceptive act or practice if the seller can demonstrate that:
(1) as a part of its routine business practice, the
seller has established and implemented written procedures to comply
with this chapter and enforces compliance with the procedures;
(2) the violation of this chapter is the result of
error; and
(3) the seller prospectively canceled the renewed
contract within a reasonable time after becoming aware of the error
that caused the violation of this chapter, without penalty to the
consumer, and has not subsequently automatically renewed or revived
that same contract.
(c) Subsection (b)(3) does not relieve a consumer of the
consumer's duties under a contract before the date the contract is
canceled.
SECTION 2. The change in law made by Chapter 606, Business &
Commerce Code, as added by this Act, applies only to a contract
executed on or after September 1, 2009. A contract executed before
September 1, 2009, is governed by the law as it existed on the date
the contract was executed, and the former law is continued in effect
for that purpose.
SECTION 3. This Act takes effect September 1, 2009.