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New York Proposes New Limitations on Sellers of Discount Buying Club Memberships

Proposed legislation recently introduced in the New York Senate would impose new limitations on discount buying clubs.

Proposed legislation recently introduced in the New York Senate would impose new limitations on discount buying clubs. 2013 New York Senate Bill 5632, styled the "Discount Buying Club Consumer Protection Act," would require sellers of discount buying club memberships to give potential buyers time in which to cancel their membership, and would impose new restrictions on their sales practices.

Under the terms of the bill, buyers would have the right to cancel discount buying club agreements within three days of signing the agreement. Moreover, sellers would be obligated to inform buyers both orally and in writing of their right to cancel. The buyer's notice of cancellation, so long as written, need not be in any particular form. Nevertheless, sellers would be obligated to provide buyers with a statutorily prescribed "Notice of Cancellation" form to facilitate their ability to cancel.

Sellers would also be obligated to "clearly and conspicuously" inform buyers, prior to their signing the agreement, of the range of costs associated with the agreement.

Additionally, the bill provides a number of specific limitations on the practices that sellers would be permitted to employ in connection with selling discount buying club memberships. These include:

  • Directly or indirectly representing that the consumer must sign the agreement on the same day as the sales presentation in order to avoid a lifetime prohibition on purchasing the discount buying club services from the seller;
  • Offering any gifts, sweepstakes or prizes as a solicitation to attend a sales presentation, unless the seller honors the promotion in accordance with the terms of its promise;
  • Offering free trial memberships without clearly and conspicuously disclosing all material restrictions, including any restrictions on the brands and amount of merchandise that can be purchased;
  • Failing to clearly and conspicuously disclose, prior to the sale of the club membership, any costs or fees added to the price of merchandise, including freight and shipping costs, handling fees, and potential manufacturer or supplier price increases;
  • Seeking to enforce, in a legal proceeding or by reporting to a consumer reporting agency, a buyer's failure to make payment under any retail installment contract, obligation or credit agreement that is tied to a sales finance company not licensed in compliance with New York's banking law.
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