Ban Unordered Billing

Any receipt of unordered goods shall be deemed a gift to the recipient. Subparagraph 2. prohibits the requesting of payment for unordered goods and services. Subparagraph 3 prohibits the proposing of any contract or contract terms for unordered or unrequested goods which purportedly become effective upon the recipient's failure to respond with a speci- fied time. Any such proposal is deemed to be void as against public policy. Subparagraph 4 requires that any unordered or unrequested tangi- ble goods (defined as any good sent to the recipient in a container) must be prominently marked on the container in bold letters "THIS IS A GIFT PAYMENT NOT REQUIRED FOR THIS ITEM".

Subparagraph 5 requires senders at least thirty days prior to the send- ing or furnishing of any unordered or unrequested intangible goods or services to mail or deliver a written notice separate from any other document mailed to the recipient, containing a short, clear and coherent statement in at least 10-point bold type, that a good or service is to be sent or furnished to the recipient, the name and a short description of the good or service, the appropriate date or dates such good or service is to be sent or furnished, that the good or service is a gift, and that payment is not required. Subparagraph 6 would exclude from coverage such membership or club arrangement in which the recipient receives goods at specified intervals or plans where the recipient agrees to receive goods without further obligation.

Subparagraph 7 excludes from the bill's provision unordered services or unrequested services in connection with the renewal or extension of such contract, providing the renewal or extension of such contract, providing the renewal was otherwise permitted by law or the terms of such contract and that no fee or charge has been imposed for the unordered or unre- quested service which is in addition to the service or services which were the subject of such contract.

Subparagraph 8 permits any recipient who has been injured by any violation of the act to bring an action to enjoin the unlawful act or practice or for damages. A minimum damage amount of $50.00 IS provided for violations of the act. Prevailing plaintiffs may be awarded reason- able attorney's fees. Further, the subparagraph makes clear that the receipt of bill statements or requests for payment for unordered or unrequested goods or services itself constitutes injury under the act, even if the recipient has no 'provable economic damages.

Subparagraph 9 clarifies that this statute does not limit any rights or remedies otherwise available to recipients under other provisions of law, including but not limited to the Uniform Commercial Code, or Arti- cle 22-A of the General Business Law, New York's deceptive practices statute.

Subparagraph 10 prohibits any waiver by the recipient, by agreement or otherwise, of any of his or her rights.

Existing law

The present statute (paragraph a of subdivision 2 of section 396 of the General Business Law) prohibits businesses from offering for sale "goods, wares or merchandise" not ordered by the recipient, and declares that any such goods sent to a consumer shall be considered a "gift".

Justification

This statute is directed against two related unscrupulous business prac- tices: billing for goods and services which the consumer did not order or request, and "negative option plan" - offers by businesses which purport to be accepted if not rejected by the consumer within a stated period of time. In 1966, the Legislature enacted Chapter 66 of the Laws of 1966, in response to a long-standing practice of shipping unordered goods to consumers and then demanding payments either unconditionally or unless the goods were returned at the consumer's expense. (See. Givens, Practice Commentaries. McKinney's Cons. Laws of N.Y. Book 19. Gen. Bus. Law 196 (Supp. At 99). In his memorandum in support of this legislation Attorney General Lefkowitz stated that his office had "received a virtu- al avalanche of complaints that reordered merchandise had been forwarded by mail or hand delivered to resident...." Many persons receiving such merchandise and particularly parents of children, to whom unordered merchandise has been delivered, had been pressured into paying for this merchandise. Although the practice appears to have abated somewhat since the enactment of Chapter 66. The Consumer Protection Board (CPB) continues to receive complain is of unordered book and merchandise.

Further, some complaints have concerned unrequested services. For exam- ple, the CPB has received complaints concerning a firm which has billed customers for telephone directory advertisements the customers never requested. As New York's unordered goods statute, contained at Subdivi- sion 2 of Section 396 of the General Business Law, applies to "goods, wares or merchandise", it is unclear whether unsolicited services are covered by the statute. Further, the present statute's provision requir- ing a disclosure on the container that the merchandise is a gift appears inapplicable to intangible goods and services. This proposal seeks to address these statutory ambiguities by making Section 396(2) applicable to unordered intangible goods (ie. computer software) and to services. Further, business continue to use deceptive and unreasonable "negative option plans"offers which purport to be accepted if not responded by the customer within a stated period of time. In 1991, Telecommunications Inc. (TCI), the nation's largest cable oper- ator, announced a controversial new plan in which subscribers were offered at no charge the Encore movie channel for a short period. Howev- er at the end of the free promotional period, TCI billed every customer who had not affirmatively indicated within the specified period that he or she did not wish the service. Present remedied against such "negative option plans" are at best inadequate under present law. Use of such a plan may be a deceptive practice under Section 349 of the General Busi- ness Law, but the CPB is unaware of a legal decision which has specif- ically so held. (See. Givens. Practice Commentaries McKinney's Cons. Laws of N.Y., Book 19 Gen. Bus. Law 396 Supp. At 99.) Moreover, although contract law generally regards legal offers not binding if not affirmatively responded to, limited cases exist where a party's failure to act will lead to a binding contract. A common example of this, is the situation where the recipient of the offer uses or obtains the benefit of goods or services for a period of time without rejecting them.

This harsh legal rule is a trap for the unwary consumer. For example, where the company's service offering rapid change, such as in the area of cable television, the consumer may be unaware that the new service he or she has been offered (i.e. new television channel) requires addi- tional payment. Finally, consumers have no private right of action under the Federal Trade Commission's "negative option rule, which is limited in scope to plans in which a seller periodically offers to send subscribers new merchandise." (16 CFR Part 425). As this proposal would prevent consumers from unfairly having to make payment for requested services as well as goods, and establishes a clear legal rule in this ear, the bill deserves enactment.

Legislative history

First introduced in 1997. 2008-2009, S.4797 - Died in Committee; 2009-2010, S.4931 - Died in Committee; 2011-2012, S.336 - Died in Committee; 2013-2014, S.1385 referred to Consumer Protection

Fiscal implications

None.

Effective date

This act shall take effect immediately.