Another Example Why Alarm Companies Get A Bad Rep - Cancellations

As a point of law, this may be perfectly legal. In terms of ethics or customer service, it is awful and incents customers to switch to DIY or non traditional providers.

Alarm attorney Kirschenbaum tells an alarm company that if a customer cancels, they can discontinue providing monitoring but still charge them until the end of their term, e.g. "You need to be clear that it was the subscriber who canceled and that you have advised the subscriber that there is an outstanding contract and that the subscriber is responsible for the payments pursuant to the contract terms."

How many customers after being forced to pay for months of getting nothing are going to be excited about getting alarm monitoring in the future?

I hate the alarm monitoring side due to things like this. I can give you a reason why they do this...from what I have been told.

When the customer signs up, they usually get free equipment if they sign a contract for 24 to 36 months. The alarm dealer does not make a profit until the 3rd to 5th year.

That does appear to be the standard response. I am curious how accurate those claims are, surely there is some subsidy but it is not clear when the break even point it. Anyone have any info / numbers on that?

Also, I would think even if someone cancelled, if you are not going to refund their payment, at least let them continue to get the service until the end of the contract, no?

I would agree on that.

I've heard you can thank large National companies like ADT for the free equipment. To compete, smaller companies have to do the same thing.

If you can afford it, buy the equipment and don't sign a long contract. Alarm dealers should probably have no mandatory month long contract if the equipment is purchased.

On another note, many times there is a 3rd party involved also. That is the Monitoring Centers agreement with the alarm dealer.

Stuff like this is why there is a rash of DIY installed and self-monitored intrusion alarms flooding the market right now, ie Simplisafe, Scout, Canary, Sentri, and many others.

The numbers provided by End User 1 are pretty accurate. No profit until at least the 3rd year. Generally the company provides the equipment at cost and pays the installer, so they are out of pocket a good deal of money. As with any leasing program, there are charges to pay. Money is a commodity like everything else.

Having said that, we do not lease. We only sell our systems. As a "bonus", we do not have any long term contracts either. Customers can cancel with 30 days notice. It seems fair to me.

It is a State-by-State issue, but customers are allowed to cancel service with proper notice and the company is bound by law to observe it. At the same time, a term contract for payment is still a contract. I don't care for it, that's why we don't do it.

If you lease a car and later decide you don't want it anymore, for whatever reason, more often than not, you still owe the lease payments, even if you don't drive it.

So I've been one of those guys who had to enforce contracts. There are many reasons to hold a person responsible and this isn't the only industry.

Have you ever leased a vehicle or apartment. Was it easy to change your mind and terminate when something in your life changed? Did you ever pay rent on an apartment you didn't occupy, or knowingly sign a lease with a penalty for early termination that was essentially the balance of the lease?

If it's a simple monitoring agreement almost all alarm companies will let you out since it's really not worth the effort. Although what you lose is a multiple of 24 to 44 times that monthly payment in value if you were to sell your company.

If it is a lease or rental there is an installation labor, equipment, sales commission and business operations expense factored in. Again, there is a value of the contract which exceeds this simple monthly payment.

IPVM uses its policy of returning any unused value if you quit as a marketing tool to calm the nerves of anyone believing there is a risk. Many alarm companies that only provide monitoring fees will do a month to month and you might pay slightly more for the benefit for a similar reason. IPVM has no labor or product invested that they wouldn't have with or without the customer. An alarm company with a few hundred dollars in parts, a few hundred dollars in labor and commission wants to make a profit and they should, at least IMHO.

My point is about canceling the service, not making them pay. If someone is paying, you should still provide the service to the end of the contracted, paying, term. Agree/disagree?

In this case, the customer appears to not need the service anymore so he isn't getting it. Of course if there was a service still to provide the company would be contractually obligated to provide it.

Let's turn this around a bit. Let's say there was a contract for $1,000.00 to install and $50.00 per month to monitor/lease payment. What would the customer do if after a few months the alarm company said..."Hey, we don't want to offer this anymore and we are going to cancel your contract and you need to find another company, we will pick up our stuff in a week. We don't need you as a customer anymore."

If they still needed the service they would not have cancelled unless they were seriously dissatisfied or perhaps found a better deal elsewhere. One is a reason to break the agreement after some effort and the other isn't.

Actually no. I am sorry to disagree. It makes perfect sense yes, but some customers just refuse common sense advice. We had one lady recently who cancelled her service, and we promptly cancelled, no problem. From that point on, her alarm was local only, no central station. One day her keypad told her the battery needed service. She swore we made it do that. She had read about that "scam" on the internet. She was convinced that somehow it was us trying to "work our way back in" to her pocketbook. At no cost, I sent a tech out there to shut down the system. She was as happy as a lark. People are odd sometimes.

Edit: By the way, when I offered her a free battery, she refused.

I was in the business for 18 years and the numbers given are spot on. We did a lot of SMB and for door contacts, a PIR, a panel and keypad we were at about $1,000 to install no chage.

Typical contract was $40 per month on a 3 yr. contract so the profit didn't show up till that 3rd year

Commercial and residential are two entirely different worlds, they really are. The expectations are completely different. Commercial customers understand that in order to run wire, we may have to make a hole somewhere. They understand that we don't control the bandwidth provided. They get things. Residential customers don't always understand that. Their home is their kingdom and you had better respect that; and they watch way too much CSI TV.

I've been in the alarm industry going on twenty years. Monitoring agreements are perceived as rip-offs and I have seen instances of unscrupulous behavior by some larger companies (I won't name any names, but think solid orange color) selling the elderly and financially challenged 60 month contracts at outrageous monthly rates.

The industry has suffered a bad reputation, but a reputable dealer will sell a valuable service that is in the customers best interest and believes in the service they provide. Point-in-fact, I do not ask residential customers to sign more than a two year agreement, but I typically charge more up front for installation. I only sell comprehensive systems and I see it as my job to help the consumer understand that you get what you pay for. Kit systems rarely offer much protection and provide a false sense of security, not to mention their prolific existence in the market, especially residential, has done great harm by driving up false-alarms and damaging the industries reputation with local law enforcement.

Selling anything other than the most complete protection, to me, is simply an effort to generate as much RMR as quickly as possible. This method requires strong and aggressive sales to keep up with customer turn-over. I prefer to sell slowly and retain my customers, with auto-renewing contracts and responsive service. (In my town simply answering your customers phone calls goes a long, long way.)

As an added incentive and service, I include basic cellular charges and system service in the monitoring agreement. If a residential customer defaults on a contract, I usually let it go. But keep in mind, most monitoring companies have a stake in these contracts as well, and the dealer has to work to protect their relationship with the central stations as well, so sometimes contracts that go into default must be pursued.

I have been in the industry the same and i remember when you paid for what you got and then nogotiated the monitoring . Well the status Quo has changed this . No Everyone thinks it s free and you just have a monthly payment.

Well how is this scenerio. The Blue Sign company signs up the school district with a great 3 year savings contract at a low rate you just cant beat on the street.

Then the company begins to rake in the bucks at double the service rates and Trip, truck, distance charges that come out to about 4 times the cost of the other guys locally.

YOU SEE there is no FREE Lunch , you will pay one way or another.

local guys 2 hour @ 90/hour no trip or other charges , The BiG Blue comes out @ 560.00 per 2 hour service call. I think your paying @ least twice the rate.

Orange , Blue Guys have a great slogan (Free) with a gift card when you set up.

Auto renewing, 3-5 year , Extreme Service Rates

Great Free System

You took the words out of my mouth. My company has been in business 17 years in Colorado and we have managed to retain some very large customers, simply because they recognize the value added feature of doing business with us. Several school districts, multiple utilities and county agencies, we've managed to keep them for years because we don't practice the old $99 installed bait and switch sales gimmicks, or lock in temporary low monthly monitoring all the while charging them for the air they breathe!

Earlier this summer a res customer of mine contacted me and asked if I could talk to his elderly mother who still lives alone. Found out she had signed a contract with "Orange" and 31 days after signing the contract she wanted out. NO GO. They wouldn't do it.

The clincher?

They signed her for 5 years

$99.00/mo. for two door contacts; one motion; one keypad; one glass break and a medical alert pendant! A pendant that broke 2 days after they gave it to her and never bothered replacing. Honestly, whats the big deal? It's just a medical alert device for an 80 year old woman. It's not like its the single most important component of her system; the one she's most likely to need!

Out of loyalty to my friend and disgust for my competitor, I installed a communicator w/built in wireless, gave her a new pendant (water proof). I charged her $15.00 for the pendant and she allowed me to rip out the Orange signs and put mine in her yard. I sold 2 residential alarm systems because of her recommendation.


I have to be honest, I am being a little unfair. I'm sure there are franchises of these large company's that take this industry as serious as I do and for those who do....I applaud them!

(I get a little over-zealous and passionate about this topic)

FWIW, I have some dealers doing this with video systems as well, primarily for commercial accounts.

Customers don't want to pay for the install up front, so the equipment cost is amortized over roughly 2 years. They typically require a 4 year contract since they don't make any money the first 2 years. It's not a *bad* deal, but of course the financing cost of this is built in to the price. If the customer paid for the install up front and then just paid 4 years of monitoring they'd probably save about 15% overall, but not every business has the cash flow for that.

Thanks for the comments

I like to believe there is Still Integrity in the industry and the True Criminals are on the street, and not in the company salesman who does not care about anything but long term contracts.

There Should Be a "Truth in Advertising Act " allowing a contract out clause for deception and not up front disclosures. and a larger lettering so senior are not taken so easily.

If the standard is to be high for security professionals , the they should have to be held responsible for their actions.

The Financial picture should be upfront and not after you get the bill.

Clear and Transparent

There Should Be a "Truth in Advertising Act " allowing a contract out clause for deception and not up front disclosures...

Fraud is already a valid reason for breaking a contract.

BTW, there is already a Truth in Advertising Act, though still in bill form and it applies mainly to 'Photoshopping' of images.