August 6, 2003
Sean Caine, 410-576-6357
PITFALLS OF LONG-TERM CONTRACTS FOR SERVICES
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.
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."
urges consumers to consider these factors when considering committing
to a long-term contract:
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.
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.
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.
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.
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.
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.