N.Y. AG's office nails co. for automatic renewals

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Friday, July 1, 2005

NEW YORK--In late April, New York Attorney General Eliot Spitzer announced a settlement with a White Plains, N.Y.-based alarm company after he cited it for violating consumer protection laws.
The company, Alarm Specialists, was accused of improperly renewing alarm contracts for approximately 4,000 customers by concealing the renewal process and the duration of the automatic renewals in the fine print of its security contracts. The fine print stated that a customer's contract would be automatically renewed for five years unless notice was received 60 days prior to the contract's expiration date.
But state law requires companies to provide customers with written notices of automatic renewals by certified mail, informing them of the opportunity to cancel the contract, which Alarm Specialists failed to do.
Christine Pritchard, a spokesperson for the attorney general's office, said these violations have occurred before.
"This isn't the first time we have cited an alarm company for the same problem," she said.
In 2001, ABC Alarm Company and its predecessor, Crime Busters Inc., were accused of the similar violations in regards to state consumer protection laws. That offense turned into a $10,000 fine to cover customer reimbursements and $15,000 in civil penalties.
Eric Pritchard, an attorney with Tannenbaum & Chanin, said when it comes to business contracts in the state, it is crucial to abide by the law.
"The failure to comply by the law in New York means the company no longer has an enforceable contract," Pritchard said, meaning the company does not have the protections of a contract and may not have the right to be paid. "It is a very bad idea not to comply with the law in New York for an alarm company," he said.
Neil Rhodes, a co-owner of Alarm Specialists, told the Westchester County Business Journal that the company was unaware of what he called a recent change in the law and that the error was not intentional. Rhodes did not return calls to Security Systems News prior to press time.
But, Christine Pritchard said the law has not been altered since 1963.
The alarm firm settled with Spitzer's office by agreeing to pay $3,000 in penalties. It must also notify users that they were subject to renewals and that they can terminate their contracts. It also agreed to rework its contracts to clearly state the length of the contract and the terms for renewal.
"Our goal in this matter was to have the company rewrite its contract and have the company abide by the law," she said.