AB 1900: Consumer refunds: nondisclosure agreements.
- Session Year: 2023-2024
- House: Assembly
- Latest Version Date: 2024-07-15
Current Status:
Passed
(2024-07-15: Chaptered by Secretary of State - Chapter 89, Statutes of 2024.)
Introduced
In Committee
First Chamber
In Committee
Second Chamber
Enacted
Existing law generally regulates the formation and enforcement of contracts, and also regulates consumer refunds specific to certain industries and under specified circumstances.
This bill would make a provision in a contract or agreement that prohibits a consumer from publishing or making statements about the business as a condition of receiving a refund or other consideration or thing of value contrary to public policy and void and unenforceable.
Existing law generally regulates the formation and enforcement of contracts, and also regulates consumer refunds specific to certain industries and under specified circumstances.
This bill would make a provision in a contract or agreement that prohibits a consumer from publishing or making statements about the business as a condition of receiving a refund or other consideration or thing of value contrary to public policy and void and unenforceable.
Existing law generally regulates the formation and enforcement of contracts, and also regulates consumer refunds specific to certain industries and under specified circumstances.
This bill would make a contract, provision in a contract, or nondisclosure provision in a contract or agreement that prohibits a consumer from publishing or making negative statements about the business as a condition of receiving a refund or other consideration or thing of value contrary to public policy and void and unenforceable.
Existing law generally regulates the formation and enforcement of contracts, and also regulates consumer refunds specific to certain industries and under specified circumstances.
This bill would additionally include as an unlawful act requiring a consumer to sign a make a contract, provision in a contract, or nondisclosure agreement or otherwise prohibit that prohibits a consumer from publishing or making negative statements about the business as a condition of receiving a refund. refund void and unenforceable.
Existing law, the Consumer Legal Remedies Act, makes unlawful specified unfair methods of competition and unfair or deceptive acts or practices undertaken by a person in a transaction intended to result or that results in the sale or lease of goods or services to a consumer, including inserting an unconscionable provision in a contract. Existing law authorizes a consumer who suffers damage as a result of the use or employment by a person of a method, act, or practice declared to be unlawful by that provision to bring an action against that person to recover or obtain certain relief, including actual damages.
This bill would additionally include as an unlawful act requiring a consumer to sign a nondisclosure agreement or otherwise prohibit a consumer from publishing or making negative statements about the business as a condition of receiving a refund.
Any provision in a contract or agreement that prohibits a consumer from publishing or making statements about the business as a condition of receiving a partial or complete refund or any other consideration or thing of value is contrary to public policy and shall be void and unenforceable.
Any provision in a contract or agreement that prohibits a consumer from publishing or making statements about the business as a condition of receiving a partial or complete refund or any other consideration or thing of value is contrary to public policy and shall be void and unenforceable.
A contract, provision in a contract, or nondisclosure Any provision in a contract or agreement that prohibits a consumer from publishing or making negative statements about the business as a condition of receiving a refund is partial or complete refund or any other consideration or thing of value is contrary to public policy and shall be void and unenforceable.
A contract, provision in a contract, or nondisclosure agreement that prohibits a consumer from publishing or making negative statements about the business as a condition of receiving a refund is void and unenforceable.
SECTION 1.Section 1770 of the Civil Code, as added by Section 3 of Chapter 400 of the Statutes of 2023, is amended to read:1770.(a)The unfair methods of competition and unfair or deceptive acts or practices listed in this subdivision undertaken by any person in a transaction intended to result or that results in the sale or lease of goods or services to any consumer are unlawful:(1)Passing off goods or services as those of another.(2)Misrepresenting the source, sponsorship, approval, or certification of goods or services.(3)Misrepresenting the affiliation, connection, or association with, or certification by, another.(4)Using deceptive representations or designations of geographic origin in connection with goods or services.(5)Representing that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities that they do not have or that a person has a sponsorship, approval, status, affiliation, or connection that the person does not have.(6)Representing that goods are original or new if they have deteriorated unreasonably or are altered, reconditioned, reclaimed, used, or secondhand.(7)Representing that goods or services are of a particular standard, quality, or grade, or that goods are of a particular style or model, if they are of another.(8)Disparaging the goods, services, or business of another by false or misleading representation of fact.(9)Advertising goods or services with intent not to sell them as advertised.(10)Advertising goods or services with intent not to supply reasonably expectable demand, unless the advertisement discloses a limitation of quantity.(11)Advertising furniture without clearly indicating that it is unassembled if that is the case.(12)Advertising the price of unassembled furniture without clearly indicating the assembled price of that furniture if the same furniture is available assembled from the seller.(13)Making false or misleading statements of fact concerning reasons for, existence of, or amounts of, price reductions.(14)Representing that a transaction confers or involves rights, remedies, or obligations that it does not have or involve, or that are prohibited by law.(15)Representing that a part, replacement, or repair service is needed when it is not.(16)Representing that the subject of a transaction has been supplied in accordance with a previous representation when it has not.(17)Representing that the consumer will receive a rebate, discount, or other economic benefit, if the earning of the benefit is contingent on an event to occur subsequent to the consummation of the transaction.(18)Misrepresenting the authority of a salesperson, representative, or agent to negotiate the final terms of a transaction with a consumer.(19)Inserting an unconscionable provision in the contract.(20)Advertising that a product is being offered at a specific price plus a specific percentage of that price unless (A) the total price is set forth in the advertisement, which may include, but is not limited to, shelf tags, displays, and media advertising, in a size larger than any other price in that advertisement, and (B) the specific price plus a specific percentage of that price represents a markup from the sellers costs or from the wholesale price of the product. This subdivision shall not apply to in-store advertising by businesses that are open only to members or cooperative organizations organized pursuant to Division 3 (commencing with Section 12000) of Title 1 of the Corporations Code if more than 50 percent of purchases are made at the specific price set forth in the advertisement.(21)Selling or leasing goods in violation of Chapter 4 (commencing with Section 1797.8) of Title 1.7.(22)(A)Disseminating an unsolicited prerecorded message by telephone without an unrecorded, natural voice first informing the person answering the telephone of the name of the caller or the organization being represented, and either the address or the telephone number of the caller, and without obtaining the consent of that person to listen to the prerecorded message.(B)This subdivision does not apply to a message disseminated to a business associate, customer, or other person having an established relationship with the person or organization making the call, to a call for the purpose of collecting an existing obligation, or to any call generated at the request of the recipient.(23)(A)The home solicitation, as defined in subdivision (h) of Section 1761, of a consumer who is a senior citizen where a loan or assessment is made encumbering the primary residence of that consumer for purposes of paying for home improvements and where the transaction is part of a pattern or practice in violation any of the following:(i)Subsection (h) or (i) of Section 1639 of Title 15 of the United States Code.(ii)Paragraph (1), (2), or (4) of subdivision (a) of Section 226.34 of Title 12 of the Code of Federal Regulations.(iii)Section 22684, 22685, 22686, or 22687 of the Financial Code.(iv)Section 5898.16, 5898.17, 5913, 5922, 5923, 5924, 5925, 5926, or 5940 of the Streets and Highways Code.(B)A third party shall not be liable under this subdivision unless (i) there was an agency relationship between the party who engaged in home solicitation and the third party, or (ii) the third party had actual knowledge of, or participated in, the unfair or deceptive transaction. A third party who is a holder in due course under a home solicitation transaction shall not be liable under this subdivision.(24)(A)Charging or receiving an unreasonable fee to prepare, aid, or advise any prospective applicant, applicant, or recipient in the procurement, maintenance, or securing of public social services.(B)For purposes of this paragraph:(i)Public social services means those activities and functions of state and local government administered or supervised by the State Department of Health Care Services, the State Department of Public Health, or the State Department of Social Services, and involved in providing aid or services, or both, including health care services, and medical assistance, to those persons who, because of their economic circumstances or social condition, are in need of that aid or those services and may benefit from them.(ii)Public social services also includes activities and functions administered or supervised by the United States Department of Veterans Affairs or the California Department of Veterans Affairs involved in providing aid or services, or both, to veterans, including pension benefits.(iii)Unreasonable fee means a fee that is exorbitant and disproportionate to the services performed. Factors to be considered, if appropriate, in determining the reasonableness of a fee, are based on the circumstances existing at the time of the service and shall include, but not be limited to, all of the following:(I)The time and effort required.(II)The novelty and difficulty of the services.(III)The skill required to perform the services.(IV)The nature and length of the professional relationship.(V)The experience, reputation, and ability of the person providing the services.(C)This paragraph shall not apply to attorneys licensed to practice law in California, who are subject to the California Rules of Professional Conduct and to the mandatory fee arbitration provisions of Article 13 (commencing with Section 6200) of Chapter 4 of Division 3 of the Business and Professions Code, when the fees charged or received are for providing representation in administrative agency appeal proceedings or court proceedings for purposes of procuring, maintaining, or securing public social services on behalf of a person or group of persons.(25)(A)Advertising or promoting any event, presentation, seminar, workshop, or other public gathering regarding veterans benefits or entitlements that does not include the following statement in the same type size and font as the term veteran or any variation of that term:(i)I am not authorized to file an initial application for Veterans Aid and Attendance benefits on your behalf, or to represent you before the Board of Veterans Appeals within the United States Department of Veterans Affairs in any proceeding on any matter, including an application for those benefits. It would be illegal for me to accept a fee for preparing that application on your behalf. The requirements of this clause do not apply to a person licensed to act as an agent or attorney in proceedings before the Agency of Original Jurisdiction and the Board of Veterans Appeals within the United States Department of Veterans Affairs when that person is offering those services at the advertised event.(ii)The statement in clause (i) shall also be disseminated, both orally and in writing, at the beginning of any event, presentation, seminar, workshop, or public gathering regarding veterans benefits or entitlements.(B)Advertising or promoting any event, presentation, seminar, workshop, or other public gathering regarding veterans benefits or entitlements that is not sponsored by, or affiliated with, the United States Department of Veterans Affairs, the California Department of Veterans Affairs, or any other congressionally chartered or recognized organization of honorably discharged members of the Armed Forces of the United States, or any of their auxiliaries that does not include the following statement, in the same type size and font as the term veteran or the variation of that term:This event is not sponsored by, or affiliated with, the United States Department of Veterans Affairs, the California Department of Veterans Affairs, or any other congressionally chartered or recognized organization of honorably discharged members of the Armed Forces of the United States, or any of their auxiliaries. None of the insurance products promoted at this sales event are endorsed by those organizations, all of which offer free advice to veterans about how to qualify and apply for benefits.(i)The statement in this subparagraph shall be disseminated, both orally and in writing, at the beginning of any event, presentation, seminar, workshop, or public gathering regarding veterans benefits or entitlements.(ii)The requirements of this subparagraph shall not apply in a case where the United States Department of Veterans Affairs, the California Department of Veterans Affairs, or other congressionally chartered or recognized organization of honorably discharged members of the Armed Forces of the United States, or any of their auxiliaries have granted written permission to the advertiser or promoter for the use of its name, symbol, or insignia to advertise or promote the event, presentation, seminar, workshop, or other public gathering.(26)Advertising, offering for sale, or selling a financial product that is illegal under state or federal law, including any cash payment for the assignment to a third party of the consumers right to receive future pension or veterans benefits.(27)Representing that a product is made in California by using a Made in California label created pursuant to Section 12098.10 of the Government Code, unless the product complies with Section 12098.10 of the Government Code.(28)(A)Failing to include either of the following in a solicitation by a covered person, or an entity acting on behalf of a covered person, to a consumer for a consumer financial product or service:(i)The name of the covered person, and, if applicable, the entity acting on behalf of the covered person, and relevant contact information, including a mailing address and telephone number.(ii)The following disclosure statement in at least 18-point bold type and in the language in which the solicitation is drafted: THIS IS AN ADVERTISEMENT. YOU ARE NOT REQUIRED TO MAKE ANY PAYMENT OR TAKE ANY OTHER ACTION IN RESPONSE TO THIS OFFER.(B)For purposes of this paragraph:(i)Consumer financial product or service has the same meaning as defined in Section 90005 of the Financial Code.(ii)(I)Covered person has the same meaning as defined in Section 90005 of the Financial Code.(II)Covered person does not mean an entity exempt from Division 24 (commencing with Section 90000) of the Financial Code pursuant to Section 90002 of the Financial Code.(iii)Solicitation means an advertisement or marketing communication through writing or graphics that is directed to, or likely to give the impression of being directed to, an individually identified person, residence, or business location. Solicitation does not include any of the following:(I)Communication through a mass advertisement, including in a catalog, on a radio or television broadcast, or on a publicly accessible internet website, if that communication is not directed to, or is not likely to give the impression of being directed to, an individually identified person, residence, or business location.(II)Communication via a telephone, mail, or electronic communication that was initiated by a consumer.(III)A written credit or insurance solicitation that is subject to the disclosure requirements of subsection (d) of Section 1681m of Title 15 of the United States Code.(29)(A)Advertising, displaying, or offering a price for a good or service that does not include all mandatory fees or charges other than either of the following:(i)Taxes or fees imposed by a government on the transaction.(ii)Postage or carriage charges that will be reasonably and actually incurred to ship the physical good to the consumer.(B)Compliance by a person providing broadband internet access service on its own or as part of a bundle, as defined in Section 8.1(b) of Title 47 of the Code of Federal Regulations, with the broadband consumer label requirements adopted by the Federal Communications Commission in FCC 22-86 on November 14, 2022, codified in Section 8.1(a) of Title 47 of the Code of Federal Regulations, shall be deemed compliance with this paragraph.(C)(i)For purposes of this subparagraph, financial entity means an entity that is exempt from Division 24 (commencing with Section 90000) of the Financial Code pursuant to Section 90002 of the Financial Code.(ii)A financial entity that is required to provide disclosures in compliance with any of the following federal or state acts or regulations with respect to a financial transaction is exempt from this paragraph for purposes of that financial transaction:(I)The federal Truth in Savings Act, as amended (12 U.S.C. Sec. 4301 et seq.).(II)The federal Electronic Fund Transfer Act, as amended (15 U.S.C. Sec. 1693 et seq.).(III)Section 19 of the Federal Reserve Act, as amended (12 U.S.C. Sec. 461 et seq.).(IV)The federal Truth in Lending Act, as amended (15 U.S.C. Sec. 1601 et seq.).(V)The federal Real Estate Settlement Procedures Act, as amended (12 U.S.C. Sec. 2601 et seq.).(VI)The federal Home Ownership and Equity Protection Act (15 U.S.C. Sec. 1639).(VII)Any regulation adopted pursuant to any of the federal acts in subclauses (I) to (VI), inclusive.(VIII)The California Financing Law (Division 9 (commencing with Section 22000) of the Financial Code).(IX)The California Residential Mortgage Lending Act (Division 20 (commencing with Section 50000) of the Financial Code).(X)The Real Estate Law (Part 1 (commencing with Section 10000) of Division 4 of the Business and Professions Code).(XI)Any regulation adopted pursuant to any of the state acts in subclauses (VIII) to (X), inclusive.(30)Requiring a consumer to sign a nondisclosure agreement or otherwise prohibiting a consumer from publishing or making negative statements about the business as a condition of receiving a refund.(b)(1)It is an unfair or deceptive act or practice for a mortgage broker or lender, directly or indirectly, to use a home improvement contractor to negotiate the terms of any loan that is secured, whether in whole or in part, by the residence of the borrower and that is used to finance a home improvement contract or any portion of a home improvement contract. For purposes of this subdivision, mortgage broker or lender includes a finance lender licensed pursuant to the California Financing Law (Division 9 (commencing with Section 22000) of the Financial Code), a residential mortgage lender licensed pursuant to the California Residential Mortgage Lending Act (Division 20 (commencing with Section 50000) of the Financial Code), or a real estate broker licensed under the Real Estate Law (Division 4 (commencing with Section 10000) of the Business and Professions Code).(2)This section shall not be construed to either authorize or prohibit a home improvement contractor from referring a consumer to a mortgage broker or lender by this subdivision. However, a home improvement contractor may refer a consumer to a mortgage lender or broker if that referral does not violate Section 7157 of the Business and Professions Code or any other law. A mortgage lender or broker may purchase an executed home improvement contract if that purchase does not violate Section 7157 of the Business and Professions Code or any other law. Nothing in this paragraph shall have any effect on the application of Chapter 1 (commencing with Section 1801) of Title 2 to a home improvement transaction or the financing of a home improvement transaction.(a)The unfair methods of competition and unfair or deceptive acts or practices listed in this subdivision undertaken by any person in a transaction intended to result or that results in the sale or lease of goods or services to any consumer are unlawful:
(1)Passing off goods or services as those of another.
(2)Misrepresenting the source, sponsorship, approval, or certification of goods or services.
(3)Misrepresenting the affiliation, connection, or association with, or certification by, another.
(4)Using deceptive representations or designations of geographic origin in connection with goods or services.
(5)Representing that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities that they do not have or that a person has a sponsorship, approval, status, affiliation, or connection that the person does not have.
(6)Representing that goods are original or new if they have deteriorated unreasonably or are altered, reconditioned, reclaimed, used, or secondhand.
(7)Representing that goods or services are of a particular standard, quality, or grade, or that goods are of a particular style or model, if they are of another.
(8)Disparaging the goods, services, or business of another by false or misleading representation of fact.
(9)Advertising goods or services with intent not to sell them as advertised.
(10)Advertising goods or services with intent not to supply reasonably expectable demand, unless the advertisement discloses a limitation of quantity.
(11)Advertising furniture without clearly indicating that it is unassembled if that is the case.
(12)Advertising the price of unassembled furniture without clearly indicating the assembled price of that furniture if the same furniture is available assembled from the seller.
(13)Making false or misleading statements of fact concerning reasons for, existence of, or amounts of, price reductions.
(14)Representing that a transaction confers or involves rights, remedies, or obligations that it does not have or involve, or that are prohibited by law.
(15)Representing that a part, replacement, or repair service is needed when it is not.
(16)Representing that the subject of a transaction has been supplied in accordance with a previous representation when it has not.
(17)Representing that the consumer will receive a rebate, discount, or other economic benefit, if the earning of the benefit is contingent on an event to occur subsequent to the consummation of the transaction.
(18)Misrepresenting the authority of a salesperson, representative, or agent to negotiate the final terms of a transaction with a consumer.
(19)Inserting an unconscionable provision in the contract.
(20)Advertising that a product is being offered at a specific price plus a specific percentage of that price unless (A) the total price is set forth in the advertisement, which may include, but is not limited to, shelf tags, displays, and media advertising, in a size larger than any other price in that advertisement, and (B) the specific price plus a specific percentage of that price represents a markup from the sellers costs or from the wholesale price of the product. This subdivision shall not apply to in-store advertising by businesses that are open only to members or cooperative organizations organized pursuant to Division 3 (commencing with Section 12000) of Title 1 of the Corporations Code if more than 50 percent of purchases are made at the specific price set forth in the advertisement.
(21)Selling or leasing goods in violation of Chapter 4 (commencing with Section 1797.8) of Title 1.7.
(22)(A)Disseminating an unsolicited prerecorded message by telephone without an unrecorded, natural voice first informing the person answering the telephone of the name of the caller or the organization being represented, and either the address or the telephone number of the caller, and without obtaining the consent of that person to listen to the prerecorded message.
(B)This subdivision does not apply to a message disseminated to a business associate, customer, or other person having an established relationship with the person or organization making the call, to a call for the purpose of collecting an existing obligation, or to any call generated at the request of the recipient.
(23)(A)The home solicitation, as defined in subdivision (h) of Section 1761, of a consumer who is a senior citizen where a loan or assessment is made encumbering the primary residence of that consumer for purposes of paying for home improvements and where the transaction is part of a pattern or practice in violation any of the following:
(i)Subsection (h) or (i) of Section 1639 of Title 15 of the United States Code.
(ii)Paragraph (1), (2), or (4) of subdivision (a) of Section 226.34 of Title 12 of the Code of Federal Regulations.
(iii)Section 22684, 22685, 22686, or 22687 of the Financial Code.
(iv)Section 5898.16, 5898.17, 5913, 5922, 5923, 5924, 5925, 5926, or 5940 of the Streets and Highways Code.
(B)A third party shall not be liable under this subdivision unless (i) there was an agency relationship between the party who engaged in home solicitation and the third party, or (ii) the third party had actual knowledge of, or participated in, the unfair or deceptive transaction. A third party who is a holder in due course under a home solicitation transaction shall not be liable under this subdivision.
(24)(A)Charging or receiving an unreasonable fee to prepare, aid, or advise any prospective applicant, applicant, or recipient in the procurement, maintenance, or securing of public social services.
(B)For purposes of this paragraph:
(i)Public social services means those activities and functions of state and local government administered or supervised by the State Department of Health Care Services, the State Department of Public Health, or the State Department of Social Services, and involved in providing aid or services, or both, including health care services, and medical assistance, to those persons who, because of their economic circumstances or social condition, are in need of that aid or those services and may benefit from them.
(ii)Public social services also includes activities and functions administered or supervised by the United States Department of Veterans Affairs or the California Department of Veterans Affairs involved in providing aid or services, or both, to veterans, including pension benefits.
(iii)Unreasonable fee means a fee that is exorbitant and disproportionate to the services performed. Factors to be considered, if appropriate, in determining the reasonableness of a fee, are based on the circumstances existing at the time of the service and shall include, but not be limited to, all of the following:
(I)The time and effort required.
(II)The novelty and difficulty of the services.
(III)The skill required to perform the services.
(IV)The nature and length of the professional relationship.
(V)The experience, reputation, and ability of the person providing the services.
(C)This paragraph shall not apply to attorneys licensed to practice law in California, who are subject to the California Rules of Professional Conduct and to the mandatory fee arbitration provisions of Article 13 (commencing with Section 6200) of Chapter 4 of Division 3 of the Business and Professions Code, when the fees charged or received are for providing representation in administrative agency appeal proceedings or court proceedings for purposes of procuring, maintaining, or securing public social services on behalf of a person or group of persons.
(25)(A)Advertising or promoting any event, presentation, seminar, workshop, or other public gathering regarding veterans benefits or entitlements that does not include the following statement in the same type size and font as the term veteran or any variation of that term:
(i)I am not authorized to file an initial application for Veterans Aid and Attendance benefits on your behalf, or to represent you before the Board of Veterans Appeals within the United States Department of Veterans Affairs in any proceeding on any matter, including an application for those benefits. It would be illegal for me to accept a fee for preparing that application on your behalf. The requirements of this clause do not apply to a person licensed to act as an agent or attorney in proceedings before the Agency of Original Jurisdiction and the Board of Veterans Appeals within the United States Department of Veterans Affairs when that person is offering those services at the advertised event.
(ii)The statement in clause (i) shall also be disseminated, both orally and in writing, at the beginning of any event, presentation, seminar, workshop, or public gathering regarding veterans benefits or entitlements.
(B)Advertising or promoting any event, presentation, seminar, workshop, or other public gathering regarding veterans benefits or entitlements that is not sponsored by, or affiliated with, the United States Department of Veterans Affairs, the California Department of Veterans Affairs, or any other congressionally chartered or recognized organization of honorably discharged members of the Armed Forces of the United States, or any of their auxiliaries that does not include the following statement, in the same type size and font as the term veteran or the variation of that term:
This event is not sponsored by, or affiliated with, the United States Department of Veterans Affairs, the California Department of Veterans Affairs, or any other congressionally chartered or recognized organization of honorably discharged members of the Armed Forces of the United States, or any of their auxiliaries. None of the insurance products promoted at this sales event are endorsed by those organizations, all of which offer free advice to veterans about how to qualify and apply for benefits.
(i)The statement in this subparagraph shall be disseminated, both orally and in writing, at the beginning of any event, presentation, seminar, workshop, or public gathering regarding veterans benefits or entitlements.
(ii)The requirements of this subparagraph shall not apply in a case where the United States Department of Veterans Affairs, the California Department of Veterans Affairs, or other congressionally chartered or recognized organization of honorably discharged members of the Armed Forces of the United States, or any of their auxiliaries have granted written permission to the advertiser or promoter for the use of its name, symbol, or insignia to advertise or promote the event, presentation, seminar, workshop, or other public gathering.
(26)Advertising, offering for sale, or selling a financial product that is illegal under state or federal law, including any cash payment for the assignment to a third party of the consumers right to receive future pension or veterans benefits.
(27)Representing that a product is made in California by using a Made in California label created pursuant to Section 12098.10 of the Government Code, unless the product complies with Section 12098.10 of the Government Code.
(28)(A)Failing to include either of the following in a solicitation by a covered person, or an entity acting on behalf of a covered person, to a consumer for a consumer financial product or service:
(i)The name of the covered person, and, if applicable, the entity acting on behalf of the covered person, and relevant contact information, including a mailing address and telephone number.
(ii)The following disclosure statement in at least 18-point bold type and in the language in which the solicitation is drafted: THIS IS AN ADVERTISEMENT. YOU ARE NOT REQUIRED TO MAKE ANY PAYMENT OR TAKE ANY OTHER ACTION IN RESPONSE TO THIS OFFER.
(B)For purposes of this paragraph:
(i)Consumer financial product or service has the same meaning as defined in Section 90005 of the Financial Code.
(ii)(I)Covered person has the same meaning as defined in Section 90005 of the Financial Code.
(II)Covered person does not mean an entity exempt from Division 24 (commencing with Section 90000) of the Financial Code pursuant to Section 90002 of the Financial Code.
(iii)Solicitation means an advertisement or marketing communication through writing or graphics that is directed to, or likely to give the impression of being directed to, an individually identified person, residence, or business location. Solicitation does not include any of the following:
(I)Communication through a mass advertisement, including in a catalog, on a radio or television broadcast, or on a publicly accessible internet website, if that communication is not directed to, or is not likely to give the impression of being directed to, an individually identified person, residence, or business location.
(II)Communication via a telephone, mail, or electronic communication that was initiated by a consumer.
(III)A written credit or insurance solicitation that is subject to the disclosure requirements of subsection (d) of Section 1681m of Title 15 of the United States Code.
(29)(A)Advertising, displaying, or offering a price for a good or service that does not include all mandatory fees or charges other than either of the following:
(i)Taxes or fees imposed by a government on the transaction.
(ii)Postage or carriage charges that will be reasonably and actually incurred to ship the physical good to the consumer.
(B)Compliance by a person providing broadband internet access service on its own or as part of a bundle, as defined in Section 8.1(b) of Title 47 of the Code of Federal Regulations, with the broadband consumer label requirements adopted by the Federal Communications Commission in FCC 22-86 on November 14, 2022, codified in Section 8.1(a) of Title 47 of the Code of Federal Regulations, shall be deemed compliance with this paragraph.
(C)(i)For purposes of this subparagraph, financial entity means an entity that is exempt from Division 24 (commencing with Section 90000) of the Financial Code pursuant to Section 90002 of the Financial Code.
(ii)A financial entity that is required to provide disclosures in compliance with any of the following federal or state acts or regulations with respect to a financial transaction is exempt from this paragraph for purposes of that financial transaction:
(I)The federal Truth in Savings Act, as amended (12 U.S.C. Sec. 4301 et seq.).
(II)The federal Electronic Fund Transfer Act, as amended (15 U.S.C. Sec. 1693 et seq.).
(III)Section 19 of the Federal Reserve Act, as amended (12 U.S.C. Sec. 461 et seq.).
(IV)The federal Truth in Lending Act, as amended (15 U.S.C. Sec. 1601 et seq.).
(V)The federal Real Estate Settlement Procedures Act, as amended (12 U.S.C. Sec. 2601 et seq.).
(VI)The federal Home Ownership and Equity Protection Act (15 U.S.C. Sec. 1639).
(VII)Any regulation adopted pursuant to any of the federal acts in subclauses (I) to (VI), inclusive.
(VIII)The California Financing Law (Division 9 (commencing with Section 22000) of the Financial Code).
(IX)The California Residential Mortgage Lending Act (Division 20 (commencing with Section 50000) of the Financial Code).
(X)The Real Estate Law (Part 1 (commencing with Section 10000) of Division 4 of the Business and Professions Code).
(XI)Any regulation adopted pursuant to any of the state acts in subclauses (VIII) to (X), inclusive.
(30)Requiring a consumer to sign a nondisclosure agreement or otherwise prohibiting a consumer from publishing or making negative statements about the business as a condition of receiving a refund.
(b)(1)It is an unfair or deceptive act or practice for a mortgage broker or lender, directly or indirectly, to use a home improvement contractor to negotiate the terms of any loan that is secured, whether in whole or in part, by the residence of the borrower and that is used to finance a home improvement contract or any portion of a home improvement contract. For purposes of this subdivision, mortgage broker or lender includes a finance lender licensed pursuant to the California Financing Law (Division 9 (commencing with Section 22000) of the Financial Code), a residential mortgage lender licensed pursuant to the California Residential Mortgage Lending Act (Division 20 (commencing with Section 50000) of the Financial Code), or a real estate broker licensed under the Real Estate Law (Division 4 (commencing with Section 10000) of the Business and Professions Code).
(2)This section shall not be construed to either authorize or prohibit a home improvement contractor from referring a consumer to a mortgage broker or lender by this subdivision. However, a home improvement contractor may refer a consumer to a mortgage lender or broker if that referral does not violate Section 7157 of the Business and Professions Code or any other law. A mortgage lender or broker may purchase an executed home improvement contract if that purchase does not violate Section 7157 of the Business and Professions Code or any other law. Nothing in this paragraph shall have any effect on the application of Chapter 1 (commencing with Section 1801) of Title 2 to a home improvement transaction or the financing of a home improvement transaction.
(c)This section shall become operative on July 1, 2024.|
Date
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Status
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|---|---|
| Jul 15, 2024 | Chaptered by Secretary of State - Chapter 89, Statutes of 2024. |
| Jul 15, 2024 | Approved by the Governor. |
| Jul 3, 2024 | Enrolled and presented to the Governor at 3 p.m. |
| Jun 26, 2024 | Senate amendments concurred in. To Engrossing and Enrolling. (Ayes 72. Noes 0.). |
| Jun 20, 2024 | In Assembly. Concurrence in Senate amendments pending. May be considered on or after June 22 pursuant to Assembly Rule 77. |
| Jun 20, 2024 | Read third time. Passed. Ordered to the Assembly. (Ayes 36. Noes 0. Page 4624.). |
| Jun 13, 2024 | Read second time. Ordered to Consent Calendar. |
| Jun 12, 2024 | From committee: Do pass. To Consent Calendar. (Ayes 11. Noes 0.) (June 11). |
| Jun 3, 2024 | From committee chair, with author's amendments: Amend, and re-refer to committee. Read second time, amended, and re-referred to Com. on JUD. |
| May 30, 2024 | In committee: Set, first hearing. Hearing canceled at the request of author. |
| May 1, 2024 | Referred to Com. on JUD. |
| Apr 15, 2024 | In Senate. Read first time. To Com. on RLS. for assignment. |
| Apr 15, 2024 | Read third time. Passed. Ordered to the Senate. (Ayes 75. Noes 0. Page 4778.) |
| Apr 11, 2024 | From Consent Calendar by request of Assembly Member Essayli. To Third Reading. |
| Apr 4, 2024 | Read second time. Ordered to Consent Calendar. |
| Apr 3, 2024 | Read second time and amended. Ordered returned to second reading. |
| Apr 2, 2024 | From committee: Amend, and do pass as amended. To Consent Calendar. (Ayes 12. Noes 0.) (April 2). |
| Mar 6, 2024 | In committee: Hearing postponed by committee. |
| Feb 20, 2024 | Referred to Com. on JUD. |
| Jan 24, 2024 | From printer. May be heard in committee February 23. |
| Jan 23, 2024 | Read first time. To print. |
|
Date
|
Description
|
Location
|
Votes
|
|
|---|---|---|---|---|
| Jun 26, 2024 | AB 1900 Weber Concurrence in Senate Amendments | Assembly Floor |
Passed |
|
| Jun 20, 2024 | Consent Calendar 2nd AB1900 Weber | Senate Floor |
Passed |
|
| Jun 11, 2024 | Do pass and be ordered to the Consent Calendar | Senate Standing Committee on Judiciary |
Passed |
|
| Apr 15, 2024 | AB 1900 Weber Assembly Third Reading | Assembly Floor |
Passed |
|
| Apr 2, 2024 | Do pass as amended. To Consent Calendar. | Assembly Standing Committee on Judiciary |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
|
Organization
|
Position
|
Date
|
|---|---|---|
| Consumer Attorneys Of California | ** Support | |
| Consumer Federation Of California | ** Support | |
| Consumer Protection Policy Center/USD School of Law | ** Support |
CONCURRENCE IN SENATE AMENDMENTS
CSA1 Bill Id:AB 1900
Author:(Weber)
As Amended Ver:June 3, 2024
Majority vote
SUMMARY
- Prohibits the practice of conditioning consumer refunds on removing a review or signing an agreement.
- Makes a contract, provision in a contract, or agreement that prohibits a consumer from publishing or making statements about the business as a condition of receiving a refund void and unenforceable.
Senate Amendments
Make minor clarifying changes that a provision in any agreement or contract prohibiting any statement as a condition of a full or partial consumer refund is contrary to public policy and is void.
COMMENTS
Online reviews play a crucial role in consumer behavior by providing valuable information about a company or product thus influencing a consumer's decision regarding purchases of goods and services. In today's digital age, consumers heavily rely on online reviews to gain insights into the quality, performance, and overall experience of a product or service. These reviews act as a form of social proof, helping potential buyers assess the credibility and reliability of a brand or product. By reading reviews, customers can gauge the satisfaction level of previous buyers and make more informed purchasing decisions. Customers often consider the overall rating and individual reviews to evaluate the pros and cons of a product or service, comparing it with alternative options. Positive reviews can build trust and foster positive brand image—negative reviews, on the other hand, can be a death knell.
According to the Author
As explained by the author:
Several studies show that over 90% of consumers read reviews before making a purchase and that "consumers' attention to negative comments is significantly greater than that to positive comments." Still, no business should attempt to block the transparency of this information to conceal potentially poor and unsatisfactory business practices.
As noted by the author, some businesses have attempted to stop these negative reviews by conditioning consumer refunds on removing a negative review:
Unfortunately, we have seen this practice being used in recent history. In 2015, a consumer sued a telecommunications company after he had cancelled his cable service, but was still being charged for the cable box. That charge accumulated to several hundreds of dollars, at which point the consumer requested a refund. The company stated that they would release the customer of their financial obligation, but only if they did not "disclose or allow to be disclosed any of the negotiations regarding the matter, or the terms, conditions, or amounts of settlement."
Arguments in Support
Numerous consumer protection groups, including the Consumer Attorneys of California and the Consumer Protection Policy Center at the University of San Diego Law School support AB 1900. The Consumer Federation of California explain the need for this measure:
Numerous market sectors have a range of products and options, making it a challenge for consumers to accurately and independently gauge the value or effectiveness of a particular product or service. Social media has further complicated this for consumers, with "influencers" collectively paid billions by corporations creating the false impression that their product review is independent when it is not.
As a result, many people turn to user reviews to make informed decisions. However, some businesses have implemented policies that prevent previous customers from openly sharing their experiences with a particular product or service, especially if those experiences were negative. In a 2020 article by The New York Times, it was revealed that SmileDirectClub had requested customers seeking refunds—due to dissatisfaction with the product's inability to correct their dental issues and, in some cases, causing new problems—to sign a nondisclosure agreement.
Along with signing the NDA, customers were asked to delete all negative social media comments and reviews and were prohibited from telling anyone about the refund granted to them. Such practices led the District of Columbia's Attorney General to file a lawsuit against SmileDirectClub due to its improper use of NDAs, accusing the company of engaging in unfair and deceptive practices. The settlement resulted in the release of 17,000 customers from NDAs, imposed by the company, and a fine by the District of Columbia of $500,000.
These corporate policies to silence critical information act as a muzzle on consumers' actual experience and make it harder to find true, independent, unpaid reviews of products and services. More facts and clarity are needed in the marketplace, not less. If you get a refund on a product you shouldn't be silenced from letting others know what happened.
Arguments in Opposition
No opposition on file.
FISCAL COMMENTS
None.
VOTES:
ASM JUDICIARY: 12-0-0
YES: Kalra, Dixon, Bauer-Kahan, Bryan, Connolly, Haney, Maienschein, McKinnor, Pacheco, Reyes, Sanchez, Waldron
ASSEMBLY FLOOR: 75-0-5
YES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Cervantes, Chen, Connolly, Davies, Dixon, Flora, Mike Fong, Vince Fong, Friedman, Gabriel, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Lowenthal, Maienschein, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Rendon, Reyes, Luz Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Weber, Wicks, Wilson, Wood, Zbur, Robert Rivas
ABS, ABST OR NV: Wendy Carrillo, Megan Dahle, Essayli, Low, Mathis
SENATE FLOOR: 36-0-4
YES: Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese, Dahle, Dodd, Eggman, Glazer, Gonzalez, Hurtado, Jones, Laird, Limón, McGuire, Menjivar, Min, Newman, Nguyen, Niello, Ochoa Bogh, Padilla, Portantino, Roth, Rubio, Seyarto, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener, Wilk
ABS, ABST OR NV: Allen, Alvarado-Gil, Durazo, Grove
UPDATED
VERSION: June 3, 2024
CONSULTANT: Shiran Zohar / JUD. / (916) 319-2334 FN: 0003578
SENATE RULES COMMITTEE Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 | AB 1900 |
CONSENT
Bill No: AB 1900
Author: Weber (D)
Amended: 6/3/24 in Senate
Vote: 21
SENATE JUDICIARY COMMITTEE: 11-0, 6/11/24
AYES: Umberg, Wilk, Allen, Ashby, Caballero, Durazo, Laird, Niello, Roth, Stern, Wahab
ASSEMBLY FLOOR: 75-0, 4/15/24 - See last page for vote
SUBJECT: Consumer refunds: nondisclosure agreements
SOURCE: Author
DIGEST:
This bill provides that any provision in a contract or agreement that prohibits a consumer from publishing or making statements about the business as a condition of receiving a partial or complete refund, or any thing of value, is void and unenforceable.
ANALYSIS:
Existing law:
- Prohibits a debt settlement provider from posting directly, or indirectly causing to be posted, an online review or ranking on an internet website if the provider, or its agent, provided anything of value in exchange for favorable treatment in that review or ranking. (Civ. Code § 1788.302(a).)
- Provides that every person in California may freely speak, write, and publish their sentiments on all subjects, being responsible for the abuse of this right. (Cal. Const., Art. I, § 2.)
- Identifies certain types of contracts as unlawful or contrary to public policy and therefore void and enforceable. (Civ. Code §§ 1667-1670.10.)
This bill provides that any provision in a contract or agreement that prohibits a consumer from publishing or making statements about the business as a condition of receiving a partial or complete refund, or other thing of value, is contrary to public policy and void and unenforceable.
Background
Consumer reviews have become the lodestar for fellow consumers interested in learning more about a product, service, or experience. Whether a product review on Amazon or a detailed account of a restaurant on Yelp, consumers trust that these and other forms of word of mouth are authentic and paint an accurate picture of what a business has to offer.
However, some unscrupulous businesses have attempted to silence unsatisfied customers by requiring, as a condition of receiving a refund, the customer to sign a nondisclosure agreement, preventing other consumers from getting the full picture.
To address this practice, this bill provides that any contractual provisions that prohibit a consumer from publishing or making statements about the business as a condition of receiving a partial or full refund or other consideration or thing of value is void and unenforceable.
Comments
According to the author:
Several studies show that over 90% of consumers read reviews before making a purchase and that “consumers’ attention to negative comments is significantly greater than that to positive comments.” Still, no business should attempt to block the transparency of this information to conceal potentially poor and unsatisfactory business practices.
Unfortunately, we have seen this practice being used in recent history. In 2015, a consumer sued a telecommunications company after he had cancelled his cable service, but was still being charged for the cable box. That charge accumulated to several hundreds of dollars, at which point the consumer requested a refund. The company stated that they would release the customer of their financial obligation, but only if they did not “disclose or allow to be disclosed any of the negotiations regarding the matter, or the terms, conditions, or amounts of settlement.”
Protecting transparency for consumers. This bill is motivated by reports that businesses have conditioned refunds on consumers contractually agreeing to refrain from publishing or otherwise making negative statements about the business. According to an NBC Bay Area report:
NBC Bay Area responds to consumer complaints and holds companies accountable. But some businesses are firing back, and silencing the consumers we assist.
Our stories are often about issues with products or services; the frustrated people who paid for them; and how we helped. This story is about consumer disputes, too:
Faulty solar panels costing $25,000
A shady used car deal worth $15,000
Bad hearing aids to the tune of $9,000
But you won't be reading about any of those consumers. They had to sign a confidentiality agreement, sometimes called a non-disclosure agreement or NDA, to get their refunds.
That meant no TV interview, no posts on social media -- not even a word to their friends and neighbors.
Attorney Scott Kaufman sues automakers. Like us, he's seen companies hushing more consumers. "It's horrible," Kaufman said. "What they're saying is 'Look, we've been cheating people and hurting people, but we don't want anyone to know.'"[1]
The author points to a large scale instance of this practice carried out by SmileDirectClub that was the subject of litigation in Washington, D.C.:
“SmileDirectClub promised a simple, safe, and affordable way to straighten teeth and touted five-star reviews—but behind the scenes, the company silenced dissatisfied consumers and buried complaints about injuries caused by its products,” said AG Schwalb. “Now, because of the effective work of the OAG legal team, SmileDirectClub can no longer use NDAs to silence consumers as a prerequisite for seeking refunds, and thousands of SmileDirectClub customers across the country will be released from gag provisions in agreements they previously signed. This litigation and settlement sends a clear message to other businesses that using NDAs to silence customer feedback can be an unfair and deceptive trade practice and a violation of DC consumer protection law.”
SmileDirectClub, which sells clear dental aligners directly to consumers and markets them as a faster, cheaper alternative to braces, promised easy refunds to consumers. However, SmileDirectClub required almost all consumers seeking a refund to sign a restrictive NDA before they could get any money back. The NDAs used by SmileDirectClub effectively prevented dissatisfied and harmed consumers—including consumers who suffered injuries or permanent harm that required medical treatment—from publicly sharing their experiences. The NDAs prohibited most consumers from making any negative comments about SmileDirectClub or its products and required them to delete any negative reviews, social media posts, or comments they had already made. These NDAs also prohibited consumers from notifying government regulators about problems with the company’s product and required them to withdraw complaints they had already filed. Additionally, under the NDAs, consumers could not even acknowledge the existence of the agreement, and they were subject to severe penalties for violations, including fines of $10,000 per violation and threats of litigation.[2]
This bill prohibits such practices. Specifically, it makes void and unenforceable any contractual provision that prohibits a consumer from publishing or making statements about the business as a condition of receiving a refund.
This bill is author-sponsored. It is supported by the Consumer Attorneys of California. No timely opposition was received.
FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No
SUPPORT: (Verified 6/13/24)
Consumer Attorneys of California
Consumer Protection Policy Center
OPPOSITION: (Verified 6/13/24)
None received
ARGUMENTS IN SUPPORT: The Consumer Attorneys of California argue:
Consumer reviews of a product, service or experience provide highly valuable information in the marketplace as consumers are making their own choices; whether it is to determine the quality of a product, customer service, sizing, or overall satisfaction. Several studies show that consumers read reviews before making a purchase; we agree that businesses should not attempt to block the transparency of this information to conceal potentially poor and unsatisfactory business practices.
ASSEMBLY FLOOR: 75-0, 4/15/24
AYES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Cervantes, Chen, Connolly, Davies, Dixon, Flora, Mike Fong, Vince Fong, Friedman, Gabriel, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Lowenthal, Maienschein, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Rendon, Reyes, Luz Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Weber, Wicks, Wilson, Wood, Zbur, Robert Rivas
NO VOTE RECORDED: Wendy Carrillo, Megan Dahle, Essayli, Low, Mathis
Prepared by: Christian Kurpiewski / JUD. / (916) 651-4113
6/13/24 13:57:29
**** END ****
Chris Chmura, Joe Rojas & James Jackson, NDA: When a Company Tries to Buy Your Silence (May 29, 2018) NBC Bay Area, https://www.nbcbayarea.com/news/local/nda-when-a-company-tries-to-buy-your-silence/2041427/. All internet citations are current as of June 13, 2024. ↑
Press Release, AG Schwalb Announces SmileDirectClub Must Release Consumers Nationwide From Restrictive Nondisclosure Agreements (June 22, 2023) Office of the Attorney General for the District of Columbia, https://oag.dc.gov/release/ag-schwalb-announces-smiledirectclub-must-release. ↑
Senator Thomas Umberg, Chair
2023-2024 Regular Session
Bill No: AB 1900 (Author:Weber)
Version: June 3, 2024
Hearing Date: June 11, 2024
Fiscal: No
Urgency: No
Consultant: CK
SUBJECT
Consumer refunds: nondisclosure agreements
DIGEST
This bill provides that any provision in a contract or agreement that prohibits a consumer from publishing or making statements about the business as a condition of receiving a partial or complete refund, or any thing of value, is void and unenforceable.
EXECUTIVE SUMMARY
Consumer reviews have become the lodestar for fellow consumers interested in learning more about a product, service, or experience. Whether a product review on Amazon or a detailed account of a restaurant on Yelp, consumers trust that these and other forms of word of mouth are authentic and paint an accurate picture of what a business has to offer.
However, some unscrupulous businesses have attempted to silence unsatisfied customers by requiring, as a condition of receiving a refund, the customer to sign a nondisclosure agreement, preventing other consumers from getting the full picture.
To address this practice, this bill provides that any contractual provisions that prohibit a consumer from publishing or making statements about the business as a condition of receiving a partial or full refund or other consideration or thing of value is void and unenforceable.
This bill is author-sponsored. It is supported by the Consumer Attorneys of California. No timely opposition was received by the Committee.
PROPOSED CHANGES TO THE LAW
Existing law:
- Prohibits a debt settlement provider from posting directly, or indirectly causing to be posted, an online review or ranking on an internet website if the provider, or its agent, provided anything of value in exchange for favorable treatment in that review or ranking. (Civ. Code § 1788.302(a).)
- Provides that every person in California may freely speak, write, and publish their sentiments on all subjects, being responsible for the abuse of this right. (Cal. Const., Art. I, § 2.)
- Identifies certain types of contracts as unlawful or contrary to public policy and therefore void and enforceable. (Civ. Code §§ 1667-1670.10.)
This bill provides that any provision in a contract or agreement that prohibits a consumer from publishing or making statements about the business as a condition of receiving a partial or complete refund, or other thing of value, is contrary to public policy and void and unenforceable.
COMMENTS
- Stated intent of the bill
According to the author:
Several studies show that over 90% of consumers read reviews before making a purchase and that “consumers’ attention to negative comments is significantly greater than that to positive comments.” Still, no business should attempt to block the transparency of this information to conceal potentially poor and unsatisfactory business practices.
Unfortunately, we have seen this practice being used in recent history. In 2015, a consumer sued a telecommunications company after he had cancelled his cable service, but was still being charged for the cable box. That charge accumulated to several hundreds of dollars, at which point the consumer requested a refund. The company stated that they would release the customer of their financial obligation, but only if they did not “disclose or allow to be disclosed any of the negotiations regarding the matter, or the terms, conditions, or amounts of settlement.”
- Protecting transparency for consumers
This bill is motivated by reports that businesses have conditioned refunds on consumers contractually agreeing to refrain from publishing or otherwise making negative statements about the business. According to an NBC Bay Area report:
NBC Bay Area responds to consumer complaints and holds companies accountable. But some businesses are firing back, and silencing the consumers we assist.
Our stories are often about issues with products or services; the frustrated people who paid for them; and how we helped. This story is about consumer disputes, too:
Faulty solar panels costing $25,000
A shady used car deal worth $15,000
Bad hearing aids to the tune of $9,000
But you won't be reading about any of those consumers. They had to sign a confidentiality agreement, sometimes called a non-disclosure agreement or NDA, to get their refunds.
That meant no TV interview, no posts on social media -- not even a word to their friends and neighbors.
Attorney Scott Kaufman sues automakers. Like us, he's seen companies hushing more consumers. "It's horrible," Kaufman said. "What they're saying is 'Look, we've been cheating people and hurting people, but we don't want anyone to know.'"[1]
The author points to a large scale instance of this practice carried out by SmileDirectClub that was the subject of litigation in Washington, D.C.:
“SmileDirectClub promised a simple, safe, and affordable way to straighten teeth and touted five-star reviews—but behind the scenes, the company silenced dissatisfied consumers and buried complaints about injuries caused by its products,” said AG Schwalb. “Now, because of the effective work of the OAG legal team, SmileDirectClub can no longer use NDAs to silence consumers as a prerequisite for seeking refunds, and thousands of SmileDirectClub customers across the country will be released from gag provisions in agreements they previously signed. This litigation and settlement sends a clear message to other businesses that using NDAs to silence customer feedback can be an unfair and deceptive trade practice and a violation of DC consumer protection law.”
SmileDirectClub, which sells clear dental aligners directly to consumers and markets them as a faster, cheaper alternative to braces, promised easy refunds to consumers. However, SmileDirectClub required almost all consumers seeking a refund to sign a restrictive NDA before they could get any money back. The NDAs used by SmileDirectClub effectively prevented dissatisfied and harmed consumers—including consumers who suffered injuries or permanent harm that required medical treatment—from publicly sharing their experiences. The NDAs prohibited most consumers from making any negative comments about SmileDirectClub or its products and required them to delete any negative reviews, social media posts, or comments they had already made. These NDAs also prohibited consumers from notifying government regulators about problems with the company’s product and required them to withdraw complaints they had already filed. Additionally, under the NDAs, consumers could not even acknowledge the existence of the agreement, and they were subject to severe penalties for violations, including fines of $10,000 per violation and threats of litigation.[2]
This bill prohibits such practices. Specifically, it makes void and unenforceable any contractual provision that prohibits a consumer from publishing or making statements about the business as a condition of receiving a refund.
Writing in support, the Consumer Attorneys of California make the case for the bill:
Consumer reviews of a product, service or experience provide highly valuable information in the marketplace as consumers are making their own choices; whether it is to determine the quality of a product, customer service, sizing, or overall satisfaction. Several studies show that consumers read reviews before making a purchase; we agree that businesses should not attempt to block the transparency of this information to conceal potentially poor and unsatisfactory business practices.
SUPPORT
Consumer Attorneys of California
Consumer Protection Policy Center
OPPOSITION
None received
RELATED LEGISLATION
Pending Legislation: None known.
Prior Legislation:
SB 1149 (Leyva, 2022) would have limited the ability of litigants to enter into agreements or obtain court orders restricting the disclosure of factual information in civil cases involving a defective product or environmental hazard that has caused, or is likely to cause, significant or substantial bodily injury or illness or death. SB 1149 failed passage on the Assembly Floor.
SB 820 (Leyva, Ch. 953, Stats. 2018) prohibited a provision within a settlement agreement that prevents the disclosure of factual information related to specified claims or complaints, including sexual assault and sexual harassment claims. Plaintiffs in such actions retain the right to request provisions in settlement agreements that shield their identity.
AB 1682 (Stone, Ch. 876, Stats. 2016) prohibited a confidentiality or secrecy provision in a settlement agreement in a civil action for an act of childhood sexual abuse or an act of sexual assault against an elder or dependent adult and made a confidential settlement agreement void as a matter of law and against public policy. It also subjected an attorney that fails to comply with those requirements to discipline by the State Bar of California.
AB 2875 (Pavley, Ch. 151, Stats. 2006) prohibited the confidential settlement of a civil action the factual basis for which is a cause of action for “an act that may be prosecuted as a felony sex offense.”
PRIOR VOTES:
Assembly Floor (Ayes 75, Noes 0)
Assembly Judiciary Committee (Ayes 12, Noes 0)
**************
Chris Chmura, Joe Rojas & James Jackson, NDA: When a Company Tries to Buy Your Silence (May 29, 2018) NBC Bay Area, https://www.nbcbayarea.com/news/local/nda-when-a-company-tries-to-buy-your-silence/2041427/. All internet citations are current as of May 23, 2024. ↑
Press Release, AG Schwalb Announces SmileDirectClub Must Release Consumers Nationwide From Restrictive Nondisclosure Agreements (June 22, 2023) Office of the Attorney General for the District of Columbia, https://oag.dc.gov/release/ag-schwalb-announces-smiledirectclub-must-release. ↑
ASSEMBLY THIRD READING
ATR Bill Id:AB 1900
Author:(Weber)
As Amended Ver:April 3, 2024
Majority vote
SUMMARY
Prohibits the practice of conditioning consumer refunds on removing a negative review or signing a non-disclosure agreement.
Major Provisions
Makes a contract, provision in a contract, or nondisclosure agreement that prohibits a consumer from publishing or making negative statements about the business as a condition of receiving a refund void and unenforceable.
COMMENTS
Online reviews play a crucial role in consumer behavior by providing valuable information about a company or product thus influencing a consumer's decision regarding purchases of goods and services. In today's digital age, consumers heavily rely on online reviews to gain insights into the quality, performance, and overall experience of a product or service. These reviews act as a form of social proof, helping potential buyers assess the credibility and reliability of a brand or product. By reading reviews, customers can gauge the satisfaction level of previous buyers and make more informed purchasing decisions. Customers often consider the overall rating and individual reviews to evaluate the pros and cons of a product or service, comparing it with alternative options. Positive reviews can build trust and foster positive brand image—negative reviews, on the other hand, can be a death knell.
This measure would prohibit the practice of conditioning consumer refunds on removing a negative review or signing a non-disclosure agreement by rendering contracts or provisions of contracts containing such clauses void and unenforceable.
According to the Author
As explained by the author:
Several studies show that over 90% of consumers read reviews before making a purchase and that "consumers' attention to negative comments is significantly greater than that to positive comments." Still, no business should attempt to block the transparency of this information to conceal potentially poor and unsatisfactory business practices.
As noted by the author, some businesses have attempted to stop these negative reviews by conditioning consumer refunds on removing a negative review:
Unfortunately, we have seen this practice being used in recent history. In 2015, a consumer sued a telecommunications company after he had cancelled his cable service, but was still being charged for the cable box. That charge accumulated to several hundreds of dollars, at which point the consumer requested a refund. The company stated that they would release the customer of their financial obligation, but only if they did not "disclose or allow to be disclosed any of the negotiations regarding the matter, or the terms, conditions, or amounts of settlement."
Arguments in Support
Numerous consumer protection groups, including the Consumer Attorneys of California and the Consumer Protection Policy Center at the University of San Diego Law School support AB 1900. The Consumer Federation of California explain the need for this measure:
Numerous market sectors have a range of products and options, making it a challenge for consumers to accurately and independently gauge the value or effectiveness of a particular product or service. Social media has further complicated this for consumers, with "influencers" collectively paid billions by corporations creating the false impression that their product review is independent when it is not.
As a result, many people turn to user reviews to make informed decisions. However, some businesses have implemented policies that prevent previous customers from openly sharing their experiences with a particular product or service, especially if those experiences were negative. In a 2020 article by The New York Times, it was revealed that SmileDirectClub had requested customers seeking refunds—due to dissatisfaction with the product's inability to correct their dental issues and, in some cases, causing new problems—to sign a nondisclosure agreement.
Along with signing the NDA, customers were asked to delete all negative social media comments and reviews and were prohibited from telling anyone about the refund granted to them. Such practices led the District of Columbia's Attorney General to file a lawsuit against SmileDirectClub due to its improper use of NDAs, accusing the company of engaging in unfair and deceptive practices. The settlement resulted in the release of 17,000 customers from NDAs, imposed by the company, and a fine by the District of Columbia of $500,000.
These corporate policies to silence critical information act as a muzzle on consumers' actual experience and make it harder to find true, independent, unpaid reviews of products and services. More facts and clarity are needed in the marketplace, not less. If you get a refund on a product you shouldn't be silenced from letting others know what happened.
Arguments in Opposition
No opposition on file.
FISCAL COMMENTS
None.
VOTES
ASM JUDICIARY: 12-0-0
YES: Kalra, Dixon, Bauer-Kahan, Bryan, Connolly, Haney, Maienschein, McKinnor, Pacheco, Reyes, Sanchez, Waldron
UPDATED
VERSION: April 3, 2024
CONSULTANT: Shiran Zohar / JUD. / (916) 319-2334 FN: 0002717
Date of Hearing: April 2, 2024
ASSEMBLY COMMITTEE ON JUDICIARY
Ash Kalra, Chair
ABPCA Bill Id:AB 1900
Author:(Weber) – As Introduced Ver:January 23, 2024
PROPOSED CONSENT (As Proposed to be Amended)
SUBJECT: Consumer REFUNDS
KEY ISSUE: SHOULD a contract or nondisclosure agreement that conditions a consumer’s refund on not making negative statements about a business be void and uneNforceable?
SYNOPSIS
Online reviews play a crucial role in influencing consumer decisions by providing valuable information about businesses and their products and services supplied by fellow customers. In today’s digital age, consumers heavily rely on online reviews to gain insights into the quality, performance, and overall experience of a product or service. These reviews act as a form of social proof, helping potential buyers assess the credibility and reliability of a brand or product. By reading reviews, customers can gauge the satisfaction level of previous buyers and make more informed purchasing decisions. Customers often consider the overall rating and individual reviews to evaluate the pros and cons of a product or service, comparing it with alternative options. The author notes that some businesses may attempt to block the transparency of this information to conceal potentially poor and unsatisfactory business practices by requiring their customers to sign contracts that prohibit a consumer from publishing or making negative statements about the business as a condition of receiving a refund. The bill in print would add requiring a consumer to sign a nondisclosure agreement or prohibiting a consumer from publishing or making negative statements about the business as a condition of receiving a refund to the list of unlawful practices under the Consumer Legal Remedies Act. As proposed to be amended, the bill makes a contract or non-disclosure agreement that prohibits a consumer from publishing or making negative statements about the business as a condition of receiving a refund void and unenforceable. The author’s amendments are reflected in the SUMMARY, below, and explained in the analysis.
SUMMARY: Makes a contract, provision in a contract, or nondisclosure agreement that prohibits a consumer from publishing or making negative statements about the business as a condition of receiving a refund void and unenforceable.
EXISTING LAW:
- Establishes the Consumers Legal Remedies Act (CLRA), which proscribes certain unfair methods of competition and certain unfair or deceptive acts or practices undertaken by a person in a transaction intended to result or that results in the sale or lease of goods or services to a consumer, including advertising goods or services with intent not to sell them as advertised. (Civil Code Section 1770 et seq.)
- Provides, under the CLRA, that any consumer who suffers damage as a result of a practice declared to be unlawful under the CLRA may bring an action against that person to recover damages, as specified, and allows for a class action suit to be filed on behalf of a class of consumers adversely affected by an unfair method of competition, act or practice. (Civil Code Sections 1780, 1781.)
- Prohibits a debt settlement provider from posting directly, or indirectly causing to be posted, an online review or ranking on an internet website if the provider, or its agent, provided anything of value in exchange for favorable treatment in that review or ranking. (Civil Code Section 1788.302 (a).)
- Provides that every person in California may freely speak, write, and publish his or her sentiments on all subjects, being responsible for the abuse of this right. (California Constitution, Article I, Section 2.)
- Identifies certain types of contracts as unlawful or contrary to public policy and therefore void and enforceable. (Civil Code Sections 1667 to 1670.10.)
FISCAL EFFECT: As currently in print this bill is keyed non-fiscal.
COMMENTS: Online reviews play a crucial role in consumer behavior by providing valuable information about a company or product thus influencing a consumer’s decision regarding purchases of goods and services. In today’s digital age, consumers heavily rely on online reviews to gain insights into the quality, performance, and overall experience of a product or service. These reviews act as a form of social proof, helping potential buyers assess the credibility and reliability of a brand or product. By reading reviews, customers can gauge the satisfaction level of previous buyers and make more informed purchasing decisions. Customers often consider the overall rating and individual reviews to evaluate the pros and cons of a product or service, comparing it with alternative options. Positive reviews can build trust and foster positive brand image—negative reviews, on the other hand, can be a death knell.
As explained by the author:
Several studies show that over 90% of consumers read reviews before making a purchase and that “consumers’ attention to negative comments is significantly greater than that to positive comments.” Still, no business should attempt to block the transparency of this information to conceal potentially poor and unsatisfactory business practices.
As noted by the author, some businesses have attempted to stop these negative reviews by conditioning consumer refunds on removing a negative review:
Unfortunately, we have seen this practice being used in recent history. In 2015, a consumer sued a telecommunications company after he had cancelled his cable service, but was still being charged for the cable box. That charge accumulated to several hundreds of dollars, at which point the consumer requested a refund. The company stated that they would release the customer of their financial obligation, but only if they did not “disclose or allow to be disclosed any of the negotiations regarding the matter, or the terms, conditions, or amounts of settlement.”
This measure would prohibit the practice of conditioning consumer refunds on removing a negative review or signing a non-disclosure agreement by rendering contracts or provisions of contracts containing such clauses void and unenforceable.
Author’s Amendments. The current language of the bill includes the prohibition in the Consumer Legal Remedies Act (CLRA). The Legislature intended that courts construe the CLRA liberally to “protect consumers against unfair and deceptive business practices and provide efficient and economical procedures to secure such protection.” (Civil Code Section 1760.) And while the CLRA broadly prohibits unfair and deceptive practices, which this bill is surely targeting, the CLRA, by its express terms prohibits such conduct “intended to result or that results in the sale …of goods …to any consumer…” (Section 1770.) The conduct the bill is targeting—conditioning refunds on not making negative statements about a business or signing a non-disclosure agreement to that effect—is not intended to result in a sale.
Thus, the more appropriate place for this prohibition is in the Civil Code section dealing with void and unenforceable contracts. Therefore, the author wishes to replace the language in the Civil Code Section 1770 with the following language in Civil Code Section 1748.50:
1748.50. A contract, provision in a contract, or nondisclosure agreement that prohibits a consumer from publishing or making negative statements about the business as a condition of receiving a refund is void and unenforceable.
ARGUMENTS IN SUPPORT: Numerous consumer protection groups, including the Consumer Attorneys of California and the Consumer Protection Policy Center at the University of San Diego Law School support AB 1900. The Consumer Federation of California explain the need for this measure:
Numerous market sectors have a range of products and options, making it a challenge for consumers to accurately and independently gauge the value or effectiveness of a particular product or service. Social media has further complicated this for consumers, with “influencers” collectively paid billions by corporations creating the false impression that their product review is independent when it is not.
As a result, many people turn to user reviews to make informed decisions. However, some businesses have implemented policies that prevent previous customers from openly sharing their experiences with a particular product or service, especially if those experiences were negative. In a 2020 article by The New York Times, it was revealed that SmileDirectClub had requested customers seeking refunds—due to dissatisfaction with the product's inability to correct their dental issues and, in some cases, causing new problems—to sign a nondisclosure agreement.
Along with signing the NDA, customers were asked to delete all negative social media comments and reviews and were prohibited from telling anyone about the refund granted to them. Such practices led the District of Columbia’s Attorney General to file a lawsuit against SmileDirectClub due to its improper use of NDAs, accusing the company of engaging in unfair and deceptive practices. The settlement resulted in the release of 17,000 customers from NDAs, imposed by the company, and a fine by the District of Columbia of $500,000.
These corporate policies to silence critical information act as a muzzle on consumers’ actual experience and make it harder to find true, independent, unpaid reviews of products and services. More facts and clarity are needed in the marketplace, not less. If you get a refund on a product you shouldn’t be silenced from letting others know what happened.
REGISTERED SUPPORT / OPPOSITION:
Support
Consumer Attorneys of California
Consumer Federation of California
Consumer Protection Policy Center/USD School of Law
Opposition
None on file
Analysis Prepared by: Shiran Zohar / JUD. / (916) 319-2334
Bill Author
Bill Co-Author(s):