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History
- Referred to consumer protection
Full text
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Sponsor's memo
BILL NUMBER:S1947
Title of bill
An act to amend the general business law, in relation to regulating service contracts issued by mercantile establishments
Purpose/summary of provisions
To eliminate lifetime warranties and encourage finite term warranties. The general business law is amended by adding a new section two hundred eighteen-b.
Justification
A retail operation, usually an appliance store, offers a lifetime warranty on a product as a marketing inducement for sale. When the company goes out of business, the consumer suddenly realizes that the warranty was not for the life of the product, but rather the life of the business. The consumer is then stuck holding a product with a worthless warranty. In western New York alone, many examples of this situation have occurred over the years. Recently, a business in Western New York named Burnhams Inc. suddenly went out of business, leaving well over 100 consumers holding meaningless warranties. This legislation addresses this situation by abolishing lifetime warranties which, in reality, do not exist. In fact, reputable retailers admit that lifetime warranties are unrealistic to administer.
Furthermore, this legislation forces finite term warranties (i.e. 5 to 10 years) to be backed by insurance in case of a business closure. If insurance cannot be purchased, realizing that some contract holders may not be able to access affordable insurance, this proposal calls for the creation of an escrow account, whereby a percentage of the money can be withdrawn by the holder each year equal to the year of the warranty. This would allow the consumer to claim the remaining money in an escrow account if a business should fold. Finally, this legislation would also require an escrow account to be formed by the retailer against purchased goods "to be delivered." In the Burnhams case, for example, many consumers lost large amounts of money on down payments made to the company. The product had not been delivered, the down payment was made and the company folded. This bill would protect the consumer from this situation.
Fiscal implications
None to the State.
Effective date
This act shall take effect on the one hundred twentieth day after it shall have become a law.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.