CONSUMER ADVISORY:
PITFALLS OF LONG-TERM CONTRACTS FOR SERVICES

Attorney General J. Joseph Curran, Jr. recommends that consumers proceed with caution before signing a long-term contract with a business, such as a fitness center, karate school or lawn care service. Curran says many consumers regret signing long-term contacts when they find they no longer want to use the service or find the service to be unsatisfactory.

"Always think twice before signing a long-term contract for future services," Curran said. "Only do so if you have checked out the company and are sure you will want the service for the length of the contract."

Curran urges consumers to consider these factors when considering committing to a long-term contract:

The service might be unsatisfactory or not what you expected. For example, a consumer paid $2,700 for a year's membership in a video dating service. After several months and no dates, she asked for a partial refund to cancel, but the company refused. It said it never guaranteed members would get dates, that it only provided a service through which people could view other members' videos and make contact if they chose.

You might not use the service. For example, a mother signed a contract for karate lessons for her son, obligating her to pay $943 over three years, only to have the boy lose interest after a few lessons. Other consumers have joined health clubs, only to realize they really didn't want to work out regularly.

Your financial situation could change. For example, you might lose your job or add a new child to the family, which could make it difficult to continue paying for a health club membership or other service.

The business could close. If a contract requires you to pay a membership fee, dues or other fees in advance, you could lose that money if the business suddenly closes.

To protect themselves, Curran recommends that consumers:

• Find out as much as possible about the service and the company before signing a contract. Check the company's complaint record and ask the company for names of satisfied customers. Also, read the contract to find out exactly what it obligates the company to do, whether there will be any additional expenses. Ask what the company will do if the service doesn't do what it's supposed to. Does the company offer a warranty, and if so, exactly what does that provide?

• Ask if you can sign a short-term contract or join on a month-to-month basis first. Then, if you like the service, you can always sign a long-term contract.

• If a business requires a membership or other fee in advance, ask if you can pay monthly or quarterly so you don't risk losing an entire year's dues if the business closes.

• Beware of misleading statements about cancellation rights. Some businesses may try to convince you to sign a long-term contract because they say you can cancel if you change your mind or move out of the area. Read the contract to see if there is a right to cancel and if there are any limitations on it.

• Watch out for automatic renewals. Some contracts will automatically renew at the end of the initial period, unless you tell the company within a certain period of time that you do not wish to renew.

• Remember that there is no universal right to a "cooling-off" period after you sign a contract. In Maryland, only a few types of transactions allow you to cancel within a few days: you have the right to cancel a contract for a health club, self-defense school or weight loss center within three days after you sign, and the right to cancel a contract for a timeshare, vacation or campground membership within 10 days after you sign. You do not have a right to cancel other types of future service contracts unless it is clearly stated in the written contract.

Consumers can request a copy of the Attorney General's publication "Consumer's Edge: Long-Term Contracts" by calling (410) 576-6500 or read it online at www.oag.state.md.us/Consumer/edge112.htm.

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