Did you recently receive a cheque worth $25 or $50 dollars from your gas and electricity supplier?
Don’t get fool by a check in your mail…it is a legal tactic use by some 3rd party gas and electricity suppliers to renew your fixed rate contract.
These $25-$50 cheques are sent out by your current energy broker aka energy retailer that sells fixed rate gas and electricity. They are unregulated natural gas and electricity providers, which mean they can charge you whatever they want for your gas and electricity.
When you received the $25-$50 dollars cheque, it mean your contract is about to expire. These cheques will have a fine print at the back written in black and when you cash or deposit in your bank it will renew your fixed rate gas or electricity contract. This is called “negative option billing” and it is currently legal in Ontario and are use by aggressive 3rd party gas and electricity suppliers.
Joe Amort, president of the Windsor-Essex Better Business Bureau, said that contract renewal via cheque is a common tactic by aggressive energy marketers – and, unfortunately, it’s legally binding.
See what people are saying about negative option billing
“The Ontario government did pass a law in August 2005 to outlaw negative option billing, but it applies only to contracts signed after that date. Suppose you have a long-standing furnace protection plan or fixed-price natural gas plan. Unless you take specific action to get out when the contract expires, the company will roll it over for another year.”, read Watch out for negative option billing.
What you need to know about the $25-$50 dollars cheque
When your fixed rate gas and electricity contract is coming to an end, you will receive these cheques.
When you sign the cheque and go to your bank to deposit it or to cash it. You are automatically renewing your fixed rate gas and electricity contract for another 1 or 5 years.
If you have been automatically renewed (you didn’t deposit or cash the cheque), you may cancel the contract within 35 days after the first bill that shows the new price.
If you agree to a renewal or extension (for example, deposit the cheque), you have up to 14 days after you have confirmed your acceptance to change your mind and cancel the renewed or extended contract. You must give written notice of cancellation to the energy marketer or energy retailer within the 14 days.
If you don’t say no, you are on the hook for another year.
The negative option billing not only applies on the gas and electricity suppliers. This also include the health/fitness clubs, credit card, and as well as the telecommunication industries.
So pay good attention to your bills and don’t let marketers “opt you in” by your inaction.
For more information on renewal and extension on gas and electricity contracts click here and on the Ontario Energy Board website.
How negative option work
Fixed rate gas and electricity providers like to send you a cheque just before your contract expire. If you deposit or cash the cheque you renew your contract for another 1-5 years.
If you do not cash or deposit the cheque, the gas and electricity provider will send you a letter with the cancellation form. When you fill out the cancellation form and send it back, your fixed rate gas and electricity contract will end. If you do not fill the cancellation form or cash/deposit the cheque, the contract will renew itself automatically for another year.
More about negative billing on Wikipedia.org
Negative option billing is a business practice in which goods or services are provided automatically, and the customer must either pay for the service or specifically decline it in advance of billing.
Negative option billing is not inherently unethical, but it can lead to problems if buyers do not fully understand the terms, or sellers do not accept a consumer’s decision to decline a product. There is a class-action lawsuit against Scholastic Corporation by consumers who felt “harassed, deceived, intimidated, and threatened” when they tried to cancel membership.
Read more about negative option billing on Wikipedia.org
More information about negative option billing and how it affect you
More information about negative option billing on the website of the Ministry of Consumer Services of Ontario’s website.
Currently there is a new proposed energy consumer protection act that will protect consumers from hidden contract costs, excessive cancellation fees, “negative option billing” contract renewals and other unfair industry practices. Read more at the Proposed Energy Consumer Protection Act, 2009 at the Ministry of Energy and Infrastructure’s website.