Requires disclosure of early termination fees

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.