STATE HOUSE – Legislation passed by the General Assembly -- to clearly define discount buying clubs and provide certain contract requirements and a three-day right of rescission for those who become members – has become law.

Approved by the legislature were bills, (2010-H7597A) and (2010-S2621A) -- introduced by Rep. Brian Patrick Kennedy (D-Dist. 38, Hopkinton, Westerly) and Sen. Joshua Miller (D-Dist. 28, Cranston, Warwick). The bills became law on June 12 without the governor’s signature and take immediate effect.

The new law based on the Kennedy/Miller bills will add a new chapter to state law to regulate discount buying clubs. The law will place requirements on direct buying club contracts by providing a three-day right to rescind and to require that all contracts between the club and the consumer be in writing, signed and dated by all contracting parties. The contract must also provide the categories of goods and services available, the procedures by which the customers can order goods, the price setting mechanism of the club and the seller’s warranty obligations.

The new law will prohibit certain acts by a buying club, including deceptively stating that joining the club is a one-time offer or the opportunity to join is limited; discouragement or refusal to allow a customer to inspect catalogues and price sheets during regular business hours; not allowing a customer to compare prices and failing to honor a request by a customer to cancel orders under certain circumstances.

The bill sponsors said that while most clubs of this sort charge a membership and annual fee to allow customers to purchase goods on-site at reduced prices, others have created a new concept in buying that warrants careful consumer deliberation. One such club requires potential customers to pay $5,000 to become a member, yet once inside the door of the establishment there are no goods for sale but rather catalogues from which to make purchases. Once signed up and paid, individuals who are displeased with the arrangement are not allowed to opt out of the agreement.

The bills were introduced on behalf of the Attorney General of Rhode Island. Florida, Connecticut, Georgia, Idaho and North Carolina have also enacted legislation to allow for a buyer’s right to cancel contracts of this nature.

For more information, contact:

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State House Room 20

Providence, RI 02903

(401) 222-2457