AB 289

Under current law, the Department of Agriculture, Trade and Consumer

Protection regulates future service contracts, defined as contracts whose primary

purpose is to provide a customer with the right to purchase goods or services or to rent

video recordings from a contractor. Generally, future service contracts must be in

writing, may not provide the contractor more than 12 months in unearned fees, may

not contain a renewal clause, and must grant customers rights against a successor

to a contractor's interests and the right to cancel the contract within the first three

months of the contract term or within three days after the customer's first purchase

or rental worth more than $25, whichever occurs first. Also under current law, a

contractor must maintain a $25,000 bond to cover customers who lose amounts

prepaid to a contractor because the contractor has become insolvent or has ceased

to conduct business.

This bill creates a new category of future service contracts. Under the bill, these

contracts may have a term not to exceed three years, must grant the customer rights

against a successor to the contractor's interests, must permit the customer to cancel

the contract without penalty until midnight on the third day after entering into the

contract, must contain a notice of the right to cancel on a separate page, and must

permit the customer to cancel an order if the order is not delivered by the date it was

promised or to the address where the customer requested delivery. A contractor who

enters into such a contract must maintain a $250,000 bond to cover customer losses.