Some Things You Should Know About New Jersey’s New Service Contract Legislation

On January 17, 2014, Governor Chris Christie signed NJ Senate Bill 854 into law. The new law, C.56:12-87, goes into effect July 16, 2014 (180 days after enactment). Things you should know about New Jersey’s new service contract law:

  • The law takes many of its provisions straight from the Model Act, and is consistent with the national trend in service contract legislation.
  • The statute exempts service contracts from regulation under New Jersey’s insurance laws.
  • New Jersey’s law covers all agreements that fall within its definition of “service contract,” without regard to class of product covered. (Some states regulate only agreements covering specific product types or categories, such as electronic devices, motor vehicles, appliances, etc.)
  • Service contract companies must demonstrate financial responsibility in one of three ways: obtain contract liability reimbursement insurance, establish a funded reserve, or show company net worth of at least $100,000,000.
  • Service contracts must include provisions explaining the consumer’s and the contractor’s cancellation rights, cancellation procedures, and refund policies.
  • Service contracts must be written in clear and understandable language.
  • A violation of the new law constitutes an unlawful practice under New Jersey’s consumer fraud act.

More information about service contract regulation, including the new New Jersey law, may be obtained from the author or another member of the Segal McCambridge Warranty and Service Contract Group.

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