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A BILL TO BE ENTITLED
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AN ACT
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relating to restrictions on the automatic renewal of contracts. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Title 4, Business & Commerce Code, is amended by |
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adding Chapter 51 to read as follows: |
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CHAPTER 51. AUTOMATIC RENEWAL OF CONTRACTS |
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Sec. 51.001. APPLICABILITY. (a) This chapter applies only |
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to the renewal of a contract if: |
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(1) the original contract term is for six months or |
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more and the contract automatically renews for a term of at least |
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one month; or |
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(2) the price for goods or services under the contract |
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as renewed is different from the price of goods or services under |
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the contract during the immediately preceding contract term. |
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(b) This chapter does not apply to a contract: |
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(1) with: |
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(A) a governmental entity; or |
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(B) a bank, trust company, savings bank, savings |
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and loan association, or credit union organized under the laws of |
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any state or the United States; or |
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(2) for the sale, lease, or management of real |
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property. |
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Sec. 51.002. DEFINITIONS. In this chapter: |
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(1) "Automatic renewal clause" means a provision of a |
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contract that extends the term of or renews a contract if the |
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consumer does not take a specified action. |
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(2) "Consumer" means a person who acquires goods or |
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services for personal, family, or household purposes. |
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(3) "Seller" means a person who provides a service or |
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sells goods. |
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Sec. 51.003. REQUIREMENTS FOR AUTOMATIC RENEWAL. If a |
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contract between a seller and a consumer contains an automatic |
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renewal clause, the seller shall: |
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(1) for a contract described by Section 51.001(a)(1), |
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clearly and conspicuously disclose to the consumer the automatic |
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renewal clause and the procedure for canceling the automatic |
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renewal: |
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(A) at the time that the seller enters into the |
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contract with the consumer; or |
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(B) in writing not later than the 60th day after |
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the date the seller enters into the contract with the consumer; and |
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(2) give the consumer written notice of the automatic |
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renewal clause and the procedure for canceling the automatic |
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renewal not before the 90th day and not after the 15th day before |
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the last date on which the consumer may cancel the automatic |
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renewal. |
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Sec. 51.004. NOTICE OF AUTOMATIC RENEWAL. (a) Written |
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notice provided under Section 51.003(2) must clearly and |
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conspicuously disclose: |
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(1) that the contract will automatically renew if the |
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consumer does not cancel the automatic renewal; |
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(2) the cancellation procedure; |
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(3) a telephone number that a consumer may call to |
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cancel the automatic renewal; and |
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(4) the dates during which the consumer may cancel the |
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automatic renewal. |
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(b) A seller may opt to send to a consumer written notice |
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under Section 51.003(2) by mail, certified mail, or personal |
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service, or by including a statement in an invoice as provided by |
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Subsection (c). A notice that is mailed is considered given on the |
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date the notice is received. |
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(c) Notice included in an invoice must be in red ink or in |
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boldfaced type large enough to be easily noticed. |
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Sec. 51.005. CANCELLATION OF AUTOMATIC RENEWAL BY |
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TELEPHONE. A seller shall allow a consumer to cancel the automatic |
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renewal of a contract by contacting a telephone number provided by |
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the seller. |
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Sec. 51.006. CONSUMER'S RIGHT TO CANCEL. (a) A consumer |
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may cancel the automatic renewal of a contract at any time before |
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the beginning of the automatic renewal period, at no cost to the |
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consumer, by following the procedure set out in the disclosure and |
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notice provided under Sections 51.003 and 51.004. |
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(b) If the seller fails to provide either the disclosure |
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under Section 51.003(1), if required, or the notice required by |
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Section 51.003(2), the consumer may cancel the automatic renewal by |
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any reasonable means at any time, at no cost to the consumer. |
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(c) If a consumer cancels the automatic renewal as provided |
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by this section, the seller must cancel the automatic renewal with |
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no additional cost to the consumer. |
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Sec. 51.007. DECEPTIVE TRADE PRACTICE. (a) Except as |
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provided by Subsection (b), a violation of this chapter is a false, |
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misleading, or deceptive act or practice as defined by Section |
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17.46(b), and any remedy under Subchapter E, Chapter 17, is |
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available for a violation of this chapter. |
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(b) A violation of this chapter is not a false, misleading, |
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or deceptive act or practice if the seller can demonstrate that: |
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(1) as a part of its routine business practice, the |
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seller has established and implemented written procedures to comply |
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with this chapter and enforces compliance with the procedures; |
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(2) the violation of this chapter is the result of |
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error; and |
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(3) the seller prospectively canceled the renewed |
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contract within a reasonable time after becoming aware of the error |
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that caused the violation of this chapter, without penalty to the |
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consumer, and has not subsequently automatically renewed or revived |
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that same contract. |
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(c) Subsection (b)(3) does not relieve a consumer of the |
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consumer's duties under a contract before the date the contract is |
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canceled. |
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SECTION 2. The change in law made by Chapter 51, Business & |
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Commerce Code, as added by this Act, applies only to a contract |
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executed on or after September 1, 2007. A contract executed before |
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September 1, 2007, is governed by the law as it existed on the date |
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the contract was executed, and the former law is continued in effect |
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for that purpose. |
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SECTION 3. This Act takes effect September 1, 2007. |