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Georgia’s New Law on Automatic Renewal Provisions in Service Contracts

Virtually everyone is likely a party to some service contract with an automatic renewal provision—think of your contract with your cable provider or gym.  These provisions commonly state that the contract will continue for another term unless you submit a cancellation notice before a certain date. But how familiar are you with Georgia’s new law regulating automatic renewal provisions?

Chapter 12 to Title 13 of the Official Code of Georgia Annotated now governs automatic renewal provisions in service contracts.  Under that law, an automatic renewal provision is “a provision under which a service contract is renewed for a specified period of more than one month if the renewal causes the service contract to be in effect more than six months after the day of the initiation of the service contract.”  O.C.G.A. § 13-12-1(1).  A service contract is simply any “written contract for the performance of services for a specified period of time.”  O.C.G.A. § 13-12-1(4).  The new Act requires the service provider to (a) “clearly and conspicuously” disclose the automatic renewal provision in the contract, and (b), where the service contract has an initial term of 12 months or more, provide the consumer with written notification of the automatic renewal provision between 30 and 60 days before the cancellation deadline.  O.C.G.A. §§ 13-12-2, 13-12-3.  The written notification must “clearly and conspicuously” disclose both that the contract will continue unless canceled and how to obtain details on the automatic renewal provision or cancellation procedure.  O.C.G.A. § 13-12-3.  A violation of the Act “renders the automatic renewal provision of a contract void and unenforceable.”  O.C.G.A. § 13-12-5.

The Act only applies to contracts entered into on or after July 1, 2013.  Ga. L. 2013, Act 330, § 2 (H.B. 234).  Therefore, a violation of the Act cannot be used to undo past renewals.  Going forward, however, service providers will need to review their contracts and renewal notices to ensure that they clearly and conspicuously make the required disclosures.

What does “clearly and conspicuously” mean?  The phrase is not defined by the Act.  In evaluating a claimed violation of the Truth in Lending Act, the Georgia Court of Appeals held that contract terms were disclosed “clearly” and “conspicuously” where “the terms in question [were] in boldface type and are capitalized whereas the other terms [were] in lighter type and in small case letters.”  Lewis v. Citizens & S. Bank, 165 Ga. App. 824, 824, 302 S.E.2d 731, 731 (1983).  Courts will likely reach a similar conclusion in evaluating automatic renewal provisions and notices for claimed violations of this Act.

Are damages available for violations of the Act?  Perhaps.  Although the Act does not contain a private cause of action, Georgia law generally allows a party that has been injured by another party’s breach of a legal duty to recover damages for the injury.  See O.C.G.A. §§ 9-2-8, 51-1-6.  A consumer who unknowingly or unwillingly pays a service provider an automatic renewal fee under a contract that violates the Act has, at least arguably, suffered damages in the amount of the unknowingly or unwillingly transmitted renewal fee.  Because the amount of an individual renewal fee will often be small, Georgia-based service providers should expect to see this issue raised in consumer class action lawsuits.

For more information on compliance with Georgia’s new law on automatic renewal provisions, please call William Daniel Davis at (404) 869-7600.

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