Second Regular Session Sixty-fifth General Assembly STATE OF COLORADO INTRODUCED LLS NO. 06-0284.01 Duane Gall SENATE BILL 06-040 SENATE SPONSORSHIP Teck, HOUSE SPONSORSHIP (None), Senate Committees House Committees Business, Labor and Technology A BILL FOR AN ACT Concerning increased consumer protections with regard to negative option plans. Bill Summary (Note: This summary applies to this bill as introduced and does not necessarily reflect any amendments that may be subsequently adopted.) Requires conspicuous disclosure and a separate authorization whenever a purchase of goods or services involves automatic future billings by use of a credit card. Makes violation of the requirements of this act a deceptive trade practice under the "Colorado Consumer Protection Act". Be it enacted by the General Assembly of the State of Colorado: SECTION 1. Article 1 of title 6, Colorado Revised Statutes, is amended BY THE ADDITION OF A NEW PART to read: PART 11 NEGATIVE OPTION PLANS 6-1-1101. Scope - applicability. (1) This part 11 shall apply to a transaction in which: (a) All or part of the subject matter of the transaction is a negative option plan; (b) A solicitation is made to a prospective subscriber in Colorado, a contract is formed in Colorado, or both; and (c) One or more payments under the negative option plan, after the initial payment or deposit, are or will be made by means of a credit card. 6-1-1102. Definitions. As used in this part 11, unless the context otherwise requires: (1) "Contract-complete subscriber" means a subscriber who has purchased the minimum quantity of merchandise, or the minimum duration of membership, required by the terms of a negative option plan. (2) "Negative option plan" means a contractual plan or arrangement under which: (a) A seller periodically sends to subscribers an announcement that identifies merchandise, other than annual supplements to previously acquired merchandise, the that seller proposes to send to subscribers to such plan, and the subscribers thereafter receive and are billed for the merchandise identified in each such announcement, unless by a date or within a time specified by the seller with respect to each such announcement the subscribers, in conformity with the provisions of such plan, instruct the seller not to send the identified merchandise; or (b) With or without a periodic announcement as described in paragraph (a) of this subsection (2), a seller periodically renews a membership or subscription that entitles subscribers to receive goods or services and the subscribers thereafter are billed for the renewal, unless by a date or within a time specified by the seller the subscribers, in conformity with the provisions of such plan, instruct the seller not to renew the membership or subscription. (3) "Promotional material" means an advertisement containing or accompanying any device or material that a prospective subscriber sends to the seller to request acceptance or enrollment in a negative option plan. (4) "Signature" means a subscriber's signature or other legally sufficient manifestation of assent to incur charges against the subscriber's credit card. "Signature" includes, without limitation, an electronic signature. (5) "Subscriber" means any person who has agreed to receive the benefits of, and assume the obligations entailed in, a negative option plan and whose enrollment has been approved and accepted by the seller. 6-1-1103. Promotional materials - conspicuous disclosure - separate authorization required. (1) Promotional material shall clearly and conspicuously disclose the material aspects of a negative option plan in accordance with 16 CFR 425.1 (a) (1). Clear and conspicuous disclosure of the aspect of the plan under which the subscriber must notify the seller in the manner provided for by the seller, if the subscriber does not wish to purchase goods or services or renew a membership or subscription, shall be as follows: (a) If the promotional material is printed, the disclosure statement shall be printed in at least twelve-point bold-faced type. (b) If the promotional material is displayed in a web page or video transmission, the disclosure statement shall appear in type at least one-third the size of the largest headline type on the screen and shall be clearly legible. (2) (a) At or after the time of the initial payment or deposit, but before billing any future payments to the subscriber's credit card, the seller shall obtain a separate signature from the subscriber authorizing the future billing to the subscriber's credit card. (b) The separate signature authorizing future credit card billings may be obtained when the subscriber authorizes the initial payment or deposit, but only if: (I) The space provided for the separate signature is at least as prominent as any space provided for the signature authorizing the initial payment or deposit; and (II) The separate signature is clearly identified as a separate authorization for future billings to the subscriber's credit card. (3) A contract-complete subscriber shall not be billed for payments unless a new signature has been obtained within the immediately preceding twelve months. SECTION 2. 6-1-105 (1), Colorado Revised Statutes, is amended BY THE ADDITION OF A NEW PARAGRAPH to read: 6-1-105. Deceptive trade practices. (1) A person engages in a deceptive trade practice when, in the course of such person's business, vocation, or occupation, such person: (xx) Violates any provision of section 6-1-1103. SECTION 3. Effective date - applicability. (1) This act shall take effect at 12:01 a.m. on the day following the expiration of the ninety-day period after final adjournment of the general assembly that is allowed for submitting a referendum petition pursuant to article V, section 1 (3) of the state constitution (August 9, 2006, if adjournment sine die is on May 10, 2006); except that, if a referendum petition is filed against this act or an item, section, or part of this act within such period, then the act, item, section, or part, if approved by the people, shall take effect on the date of the official declaration of the vote thereon by proclamation of the governor. (2) The provisions of this act shall apply to negative option plans entered into on or after the applicable effective date of this act.