Contract language, font size gets alarm company in trouble

Settlement with the AG's office could have effects for all Penn. dealers
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Saturday, July 1, 2006

HARRISBURG, Penn.--A York County alarm company was recently hit with $13,000 in fines after it reached a settlement with Pennsylvania's Attorney General following complaints against the language and type size used in its contracts with customers.
In May, Crime Intervention Alarm Company reached an agreement to resolve those allegations and several others. The allegations included that the company failed to comply with the state's Consumer Protection Law, Telemarketer Registration Act and Plain Language Consumer Contract Act.
According to Kathryn Silcox, deputy attorney general for the Pennsylvania Attorney General's office, the state launched an investigation into the company after it received several complaints about its contracts.
"These contracts were signed primarily with the elderly, senior citizens," said Silcox. "And we noticed the fonts on the contract were extremely small."
However John Lakatosh, owner of Crime Intervention Alarm Company, said his 11-year old company did nothing wrong when it came to the words used or the design of its contract. He said the company has used the same contracts since it opened for business and that two complaints from customers in December of 2005 prompted the attorney general's office to begin an investigation.
"My contracts are really no different from ADT's, Brink's, or anybody's," said Lakatosh, adding that he reached a settlement with the attorney general's office to avoid a lengthy and expensive legal fight.
According to Silcox, the Plain Language Consumer Contract Act requires readable contracts that use plain language. It's a law that has been on the books for approximately 10 years.
Silcox said another concern with Crime Intervention Alarm Company's contract was its renewal clause. She said the customer's alarm contract would automatically renew after five years, without notification first to the customer that the contract was up for renewal.
Lakatosh said his company's contract was clearly written and the automatic renewal provision in his company's alarm contracts is fairly standard in the industry. He said he is not aware of any state law requiring written notification prior to the contract automatically renewing, but he agreed to notify customers in writing 60 days prior to the contract automatically renewing.
Eric Pritchard, a partner with law firm Kleinbard Bell & Brecker, said he is not aware of a law in Pennsylvania that requires alarm companies to notify customers prior to automatic contract renewal. He said he is only aware of one state, New York, that has a requirement like this. "It's always a state-by-state basis," when it comes to contract regulations, said Pritchard.
Pritchard advised that security companies have their contracts written or reviewed by an attorney familiar with the local jurisdiction. "In my experience, so many people take a form that people saw used by somebody else," he said.
Silcox said other claims against Crime Intervention Alarm Company said it failed to follow the state's telemarketing laws when it made several cold calls to potential customers without first buying the state's no-call registry list. And, she said, the company showed a Better Business Bureau icon on its web site when it was not a member and advertised senior citizen and veteran discounts that were then not available to customers.
"I caved," said Lakatosh, about his settlement with the attorney general's office. "I was concerned about long-term attorney fees, but the truth is I feel that I've actually done the alarm industry wrong by agreeing to these terms because every single alarm company has the same terms and conditions."