By: Howard, Leibowitz H.B. No. 533
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 4, Business & Commerce Code, is amended by
adding Chapter 48 to read as follows:
CHAPTER 48. AUTOMATIC RENEWAL OF CONTRACTS
Sec. 48.001. 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 more than
one month; or
(2) the price for goods or services under the contract
as renewed is different from the price of goods or services under
the immediately preceding contract term.
(b) This chapter does not apply to a contract with:
(1) a governmental entity; or
(2) a bank, trust company, savings bank, savings and
loan association, or credit union organized under the laws of any
state or the United States.
Sec. 48.002. 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. 48.003. REQUIREMENTS FOR AUTOMATIC RENEWAL. (a) If a
contract between a seller and a consumer contains an automatic
renewal clause, the seller shall:
(1) for a contract described by Section 48.001(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 first day of the renewal period.
(b) Written notice provided under Subsection (a)(2) must
clearly and conspicuously disclose:
(1) that the contract will automatically renew if the
consumer does not cancel the automatic renewal; and
(2) the automatic renewal provision and cancellation
procedure.
(c) A seller may opt to send to a consumer written notice
under Subsection (a)(2) by mail, certified mail, or personal
service, or by including a statement in an invoice as provided by
Subsection (d). A notice that is mailed is considered given on the
date the notice is received.
(d) Notice included in an invoice shall state in red ink or
in boldfaced type large enough to be easily noticed: "This contract
expires soon. The last day to cancel the automatic renewal of this
contract is _______________ (last day on which consumer may cancel
automatic renewal of the contract). If you would like to cancel
this contract, please contact us at _____________ (telephone
number of seller).".
Sec. 48.004. 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 Section 48.003.
(b) If the seller fails to provide either the disclosure
under Section 48.003(a)(1), if required, or the notice required by
Section 48.003(a)(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. 48.005. 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 canceled the most recent renewal of the
contract without penalty to the consumer.
SECTION 2. The change in law made by Chapter 48, Business &
Commerce Code, as added by this Act, applies only to a contract
executed on or after September 1, 2005. A contract executed before
September 1, 2005, 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, 2005.