Automatic renewal contracts

PHILADELPHIA - June 17, 2013

An automatic renewal means you could get locked into a contract year after year and get charged over and over again and not realize it until it's too late!

The good news is, we found a Pennsylvania lawmaker trying to pass legislation to protect you.

David Zambelli of Center City Philadelphia got quite a surprise when he called to cancel his contract with his home security company.

"It doesn't work, and I can't get the parts for it, and they're insisting that I have to pay a monthly fee for something that I don't have, and I can't cancel it unless I pay out the contract," he said.

Zambelli signed up for the service back in 1991 and didn't realize the contract automatically renewed and locked him in every two years!

"And I said, 'I never got a notification.' And she said, 'Oh, we don't send out notification. It's just automatically rolled over every two years.'"

The fine print that allows for automatic renewal is commonly called an evergreen clause.

"They're for alarm systems, trash collection systems, internet systems," said Lance Haver, director of the Philadelphia Office of Consumer Affairs. "They can be for almost any service that you get for an entire 12-month period."

Haver says consumers need to be better protected.

"There are laws in other states that require the company to put in bold print to get initials on it so you know what you're signing," said Haver.

Those states include Florida, Illinois, and Wisconsin. They also require notification before automatic renewal, which is the norm for many other industries.

"Banks do it all the time on Certificates of Deposit, it's really not a problem," said Haver. "The only reason a company wouldn't do it is if a company doesn't want you to know that the contract is going to renew in a year."

Representative Cherelle Parker plans to introduce legislation to address this.

"We're just simply asking for notification," she said. "So educating the consumer that you have x number of days to cancel this. If you don't cancel within this period of time, the contract would automatically be renewed."

But for now, as David Zambelli knows all too well, read your contracts carefully and set an alert on your calendar to remind you when the time comes for automatic renewal.

If this is something of concern to you, contact your local legislator and ask him or her to take action.

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