STAND. COM. REP. NO. 1223

Honolulu, Hawaii

RE:    H.B. No. 663

       H.D. 2

       S.D. 2

Honorable Shan S. Tsutsui

President of the Senate

Twenty-Sixth State Legislature

Regular Session of 2011

State of Hawaii

Sir:

     Your Committee on Judiciary and Labor, to which was referred H.B. No. 663, H.D. 2, S.D. 1, 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 the 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.

     This measure requires the clear and conspicuous disclosure of automatic renewal clauses and procedures by which consumers can cancel automatic renewals of consumer contracts.  Your Committee finds that contracts containing automatic renewal clauses are designed to continuously renew unless a party proactive and takes an action to cancel the contract.  The burden is generally placed on the consumer, who may not always notice the termination provisions.  Because of this, consumers may contract for a period longer than anticipated or unwittingly find themselves contractually bound to something they do not want.  According to the Office of Consumer Protection in testimony on this measure before the Committee on Commerce and Consumer Protection, at least eleven states have enacted legislation requiring clear disclosure at the inception of the contract and immediately prior to the renewal.

     The intent of your Committee is to ensure that consumers are fully apprised of this important contractual obligation.  This measure will satisfy those requirements by helping consumers at two critical junctures - at the inception of the contract and at the time of renewal of the contract.

     Your Committee has amended this measure by:

(1)  Exempting any regulated insurer from the disclosure requirements under this measure to the extent that the insurer is engaged in activities regulated pursuant to the Insurance Code; and

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

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

Respectfully submitted on behalf of the members of the Committee on Judiciary and Labor,

____________________________

CLAYTON HEE, Chair