Time to Renew Compliance With California Auto Renewal Law

Advertising Law

Companies that offer subscription-based plans should mark their calendars for July 1, when changes to California’s Automatic Renewal Law take effect.

The changes—pursuant to the passage of S. 313—provide additional protections to consumers, in some cases beyond the federal Restore Online Shoppers’ Confidence Act requirements.

Originally enacted in 2010, the California Automatic Renewal Law requires companies to clearly disclose the material offer terms before a consumer subscribes to an automatic renewal program, to obtain affirmative consent to the terms before charging a consumer, and to provide a confirmation to the consumer that includes the terms, a description of the cancellation policy, information about how to cancel, and an explanation that consumers may cancel before being charged if they were enrolled in a free trial. Companies must also provide an easy method for cancellation.

Starting July 1, the amendment mandates that if a consumer accepted an automatic renewal offer online, the company must allow consumers to terminate the renewal online as well (and not just by phone or mail).

A second change requires companies to provide a “clear and conspicuous explanation” of the price that will be charged after the trial ends “or the manner in which the subscription or purchasing agreement pricing will change upon conclusion of the trial.”

In addition, consumer consent is necessary before an advertiser can charge for a time-limited automatic renewal program or one that offers a discounted price, and the company must disclose how consumers can cancel an automatic renewal program prior to paying for the goods and services after a free trial period has ended.

To read S. 313, click here.

Why it matters: Particularly in light of recent enforcement efforts by regulators in California—such as a $2.2 million deal between eHarmony and California city and district attorneys challenging eHarmony’s auto renewal practices—companies that use automatic renewal programs should ensure compliance with the additional statutory requirements by July 1.