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Post date: April 13 2005

Security Company Cited For Deceptive Contracts

Attorney General Spitzer today announced a settlement with a home security company that will permit thousands of customers in Westchester and Rockland counties and New York City to cancel contracts that had been automatically renewed.

Alarm Specialists, Inc. - based in Tarrytown - was alleged to have violated state consumer protection laws that prohibit the use of automatic renewal clauses in consumer contracts unless proper notification and cancellation procedures are provided.

"Laws governing automatic renewal clauses in contracts are designed to protect consumers against unknowingly locking themselves into open-ended contracts," Spitzer said. "This settlement will allow New Yorkers whose security service contracts were automatically renewed to terminate those contracts if they wish to do so."

Spitzer’s investigation revealed that Alarm Specialists signed nearly 4,000 customers to home alarm service contracts. The contracts contained a fine print clause that provided an automatic renewal for a five year term unless the customer notified the company within 60 days of the contract’s expiration.

Under state law, the company is required to provide customers with written notice of the automatic renewal clause by certified mail and to inform customers that they can terminate the contract by written notice prior to the renewal date.

However, instead of properly notifying customers of the automatic renewal provision, Alarm Specialists automatically renewed service contracts if the customers failed to notify the company of their decision to cancel services.

Spitzer’s office also found that contracts utilized by Alarm Specialists failed to adequately disclose that the initial term of the contract was five years. Instead, this important information was buried in small print on the back of the contract, or placed in tiny print under the heading "Limited Warranty." This was deceptive and unfair to customers.

In settling the case, Alarm Specialists agreed not to enforce any automatic renewal clauses unless it has fully complied with state law by providing written notice to its customers of their right to terminate the contract. The company also agreed to modify its contracts to state clearly and conspicuously the length of the contract and the terms for renewal.

Additionally, all customers whose contracts were automatically renewed during the past eighteen months will be notified in writing of their option to terminate the contract.

Alarm Specialists, Inc. agreed to pay $3,000 in penalties and costs.

Individuals with complaints about automatic renewal clauses in contracts are encouraged to contact the Attorney General’s consumer help line at (800) 771-7755.

The case was handled by Assistant Attorney General Yasmin Kutty under the supervision of Gary S. Brown, Assistant Attorney General in Charge of the Westchester Regional Office.