LANSING – One company offers a one-year garbage disposal contract for a set price. The terms are reasonable so you sign and pay the up-front cost.

But about the time the year is up, a competitior offers a cheaper rate for the same service, so you call the first company to cancel.

The problem? The fine print of the contract states that it automatically renews unless you call 30 days before the end of the contract to cleanly break service.

You didn’t do that, so you can pay a heavy cancellation fee or stay with the higher-priced company .
As either a small business or individual, you’re the victim of deceptive business practices, according to Rep.
Chris Ward, R-Brighton.

Ward has offered a proposal, under consideration in the House Commerce Committee, that would force businesses to add separate automatic renewal forms to contracts and require them contact customers at least 30 days before a contract expires. This would end the practice of businesses renewing contracts without a customer’s explicit consent.

“I want to make sure customers are notified,” Ward said. Otherwise, “they’re going to find themselves in a vicious cycle.”

“It’s a deceptive act to automatically renew,” agreed Rick Gamber, director of the Michigan Consumer Federation, a consumer advocacy group.

He said the practice is common with lawn, trash, janitorial and some cell phone services, as well as residential leases.

Ward said the legislation focuses on long-term renewals that force consumers to stay with the same company or pay huge cancellation fees. Some of those contracts renew for three or more years at a time, reducing competition among businesses for customers who are stuck with one service.

Dave Wiltse, a South Lyon business owner and Milford Township board member, said he was a victim of such a business practice.

Wiltse said he contracted with Waste Management Co. for garbage removal for three years. At the end of the three years, he wanted to switch to another company and tried to end service with his original provider.

But he discovered that his contract had automatically renewed for another three years, he said, without his knowledge. Cancelling his contract would have cost him $250, so he didn’t.

Waste Management Co. did not return phone calls seeking comment while SBC Communications, another company that uses automatic renewal contracts, needed time to study the bill, according to an SBC representative.

Wiltse’s experience prompted the legislation, Ward said.

“A renewable contract without notification is what I took issue with,” said Wiltse. “I thought it was very unfair to the consumer.”

The other issue is competition, Ward said. When customers know their contract is about to expire, they should have a chance to look at other options before renewing their original deal, he said . This, he said, promotes

© 2003, Capital News Service, Michigan State University School of Journalism