Senate Bill S4447

                                 BILL NUMBER:  S4447

 TITLE OF BILL :  An act to amend the general business law, in
relation to prohibiting any party from charging consumers for
unordered or unrequested goods or services and to repeal paragraph a
of subdivision 2 of section 396 of such law relating thereto

 PURPOSE :

To prohibit any party from charging consumers for unordered or
unrequested goods or services and prohibit "negative option"
agreement.

 SUMMARY OF PROVISIONS :

Section one of the bill would repeal the existing paragraph (a) of
Subdivision two of section 396 of the General Business Law, and
substitute a new paragraph (a) with the provisions outlined below.
Subparagraph 1 would prohibit any persons, firm, partnership,
association or corporation or agent or employee thereof from offering
for sale tangible or intangible goods or services which have not been
actually ordered or requested by the recipient.

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 specified time. Any such proposal is deemed to be void
as against public policy. Subparagraph 4 requires that any unordered
or unrequested tangible 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
sending 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 unrequested 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
reasonable 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
Article 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
practices: 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 virtual 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
example, 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
Subdivision 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 requiring 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
operator, announced a controversial new plan in which subscribers were
offered at no charge the Encore movie channel for a short period.
However 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 Business Law, but the CPB is unaware of a
legal decision which has specifically 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
additional 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.