STAND. COM. REP. NO. 816

Honolulu, Hawaii

RE:    H.B. No. 663

       H.D. 2

       S.D. 1

Honorable Shan S. Tsutsui

President of the Senate

Twenty-Sixth State Legislature

Regular Session of 2011

State of Hawaii

Sir:

     Your Committee on Commerce and Consumer Protection, to which was referred H.B. No. 663, H.D. 2, entitled:

"A BILL FOR AN ACT RELATING TO CONTRACTS,"

begs leave to report as follows:

     The purpose and intent of this measure is to require clear and conspicuous disclosure of cancellation procedures for all consumer contracts and offers that contain automatic renewal provisions, with additional disclosure requirements for contracts with a term of twelve months or more.

     Your Committee received testimony in support of this measure from the Office of Consumer Protection of the Department of Commerce and Consumer Affairs.  Your Committee received testimony in opposition to this measure from the Hawaii Credit Union League, Hawaii Bankers Association, Property Casualty Insurers Association of America, and GEICO.  Your Committee received comments on this measure from Legislative Information Services of Hawaii and Oceanic Time Warner Cable.

     Your Committee finds that the disclosure of automatic contract renewal clause provisions required by this measure offers reasonable protections to consumers and allows for communication of the required disclosure through various types of media therefore reducing the burden of compliance for contracting entities. 

     Your Committee has amended this measure by:

     (1)  Clarifying that the notice requirement contained in this measure applies to contracts with a specified term of more than one month and an automatic renewal clause that triggers renewal of the contract for a specified term of more than one month;

     (2)  Removing the requirement that the renewal notice is required to be provided in writing to accommodate contracts that are entered into orally;

     (3)  Inserting a definition of "clearly and conspicuously" that conforms to the Federal Trade Commission's definition of that term;

     (4)  Inserting an exemption from disclosure requirements for financial institutions that are already regulated by state and federal banking laws and that engage in regulated activities;

     (5)  Inserting an effective date of July 1, 2050, to allow for further discussion; and

     (6)  Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

     Your Committee notes that the language of this measure, as amended, is a result of collaboration among stakeholders, including the State's regulatory agency.  Your Committee also notes that the exemption for financial institutions contained in this measure applies only to regulated entities engaged in activities that are already subject to extensive state and federal regulations that include disclosure requirements that may conflict with those contained in this measure.

     As affirmed by the record of votes of the members of your Committee on Commerce and Consumer Protection that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 663, H.D. 2, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 663, H.D. 2, S.D. 1, and be referred to the Committee on Judiciary and Labor.

Respectfully submitted on behalf of the members of the Committee on Commerce and Consumer Protection,

____________________________

ROSALYN H. BAKER, Chair