CONTRA COSTA COUNTY, Calif. — ADT Security Services will pay a civil penalty of $950,000 to customers here to provide restitution for residential clients whose rates increased during their initial contract, MercuryNews.com reports.
A lawsuit filed by the Contra Costa District Attorney’s Office states that ADT required its customers to enter two- or three-year contracts. During that period, the alarm company reserved the right to raise monthly fees after the first year. However, the suit alleged that ADT violated California’s Unruh Act by failing to inform customers how much the rate increase would cost.
The Unruh Act requires specific written disclosures to residential consumers of contract terms. Under the terms of the settlement, ADT will adapt its future California contracts to Unruh Act conditions.
The latest lawsuit is a wakeup call for alarm companies when it comes to compliance, Les Gold, a partner in the law firm Mitchell, Silberberg & Knupp (MS&K) tells SSI.
“Just as an admonition, whether it’s federal, state or local, alarm companies need to know what the law is,” he says. “Secondly, they need to understand the law. Lastly, make sure to comply with the law.”
Ken Kirschenbaum, who pens SSI‘s “Legal Briefing” column, agrees, noting that this suit has a negative effect on the industry as a whole.
“This type of notoriety is of course no good for ADT or the rest of the alarm industry,” he tells SSI. “Sweeping contract issues affect all alarm companies. This is a good example of why alarm contracts need to be customized from state to state and sometimes to address local municipal requirements.”