10.21.24 – SSI – Ken Kirschenbaum
Click to cancel applies to agreements with “negative options,” which means the automatic renewal provision tied to automatic payments.
The Federal Trade Commission is busy issuing regulations as Election Day 2024 nears on Tuesday, Nov. 5 and President Biden’s time in the White House winds down on Jan. 20, 2025.
The newest regulation, called “click to cancel,” affects all industries, including the alarm industry. The rule applies to agreements with “negative options,” which, as far as we are concerned, means the automatic renewal provision tied into the automatic payment or even keeping the credit card or automatic clearing house (ACH) on hand and hitting the card or account for auto-pay.
The automatic renewal clause is a staple in the security and fire alarm industry, as always I include cameras, audio and any form of electronic device monitoring and notification. Every K&K Standard Form Agreement (except those with no recurring monthly revenue) has an automatic renewal provision.
There are a number of practical, common sense reasons for the auto-renew provision:
- The security or fire alarm device or other devices provide life safety monitoring or at least deterrent [as opposed to prevention]. It would be dangerous if the service simple stopped when the contract ended, sort of like when my credit card info changed and Dish Network shut off my TV reception without notice. We can’t have security or alarms shut off without notice, and we also don’t want the burden of providing that notice to the customer. On occasion, customers do accept the responsibility of automatic shutdown with no notice, but that is exceedingly rare. So it’s neither practical nor safe to permit these contracts to come to an end and there is no reason you should be put to the burden and risk of providing notice. We can’t know if a customer will get the message of cancellation or remember they got it after an event previously covered by the alarm system occurs.
- When it comes to some systems, fire in particular, but also environmental monitoring, the authority having jurisdiction (AHJ) requires notice of termination in advance. More than one AHJ has decided that a permit would be required to remove a fire alarm.
- The alarm industry may not have invented the RMR model, but it certainly embraced that model and any alarm contract with after-install services will always have an automatic renewal clause.
What Click to Cancel Means for the Alarm Industry
Automatic renewal provisions are used in all states and some states already have laws regulating the automatic renewal provisions. The K&K Standard Form Contracts are customized state by state to comply with these various state laws.
K&K is making changes to address the FTC ruling only because the K&K contracts already have these provisions, though not in required format. I suspect this FTC ruling will be held to be unconstitutional because the FTC exceeded it power, which does not include legislating new laws.
Generally, the FTC click to cancel rule requires that certain provisions be “clear and conspicuous.” The provisions that must meet this criteria are:
- increase after a “trial period ends” [this is not likely going to affect alarm contracts]
- deadline when consumer has to click to cancel, the amount that will be charged and a simple way to cancel
Additionally the consumer’s consent to being charged for the automatic renewal must be in a separate document, which you are required to maintain for three years.
K&K is updating the consumer contracts to comply with the new rule, primarily by reformatting the consumer contracts.
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About the Author
Ken Kirschenbaum, SSI Contributor
Security Sales & Integration’s “Legal Briefing” columnist Ken Kirschenbaum has been a recognized counsel to the alarm industry for 35 years and is principal of Kirschenbaum & Kirschenbaum, P.C. His team of attorneys, which includes daughter Jennifer, specialize in transactional, defense litigation, regulatory compliance and collection matters.