California Passes Updates To Automatic Renewal Law
California has enacted new legislation updating its Automatic Renewal Law, imposing further requirements on businesses that offer promotional price subscriptions and free trial offers. Companies with subscription-based business models should begin to reassess their practices to ensure they are in compliance with the updated law.
Automatic Renewal Law
Like many states, California has had an ARL on the books for several years. The existing ARL, enacted in 2010, requires businesses that make an automatic renewal or continuous services offer to present the offer in a “clear and conspicuous” manner. It also requires consent from the customer before charging for an automatic renewal and an explanation about how to cancel the service.
Under the recently enacted Senate Bill No. 313, which updates the ARL and takes effect July 1, 2018, businesses cannot require consumers who signed up online to cancel their subscription over the phone or by mail. If the offer is made online, consumers must have the ability to cancel online.
The updated law also clarifies disclosure requirements for free gift or trial offers. Specifically, it requires automatic renewal offers to include a clear explanation of the price that will be charged after the trial ends, or how the promotional price subscription will change once the trial is over. Businesses will also need consent from the consumer to the non-discounted pricing before charging them.
To avoid potential claims under the updated ARL, companies should make sure the initial offer terms are “clear and conspicuous” and inform the consumer of all relevant terms, including the length of the automatic renewal, the amount that will be charged and how the consumer can cancel. In addition, companies need to ensure that consumers have consented to the agreement before they are charged and have the ability to cancel the offer online, if that is how it was executed.