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New York State enhances the consumer notification obligations on automatic renewals
Recently, the State of New York enacted SB 5941-B (the “Act”), which revises the general business law, focusing on the obligation of businesses to inform consumers about an impending automatic renewal or continuous service charge at least forty-five days before the charge is applied. The amendment states that in the case of a business allowing a consumer to accept an automatic renewal of six months or more, the business is required to notify the consumer about the upcoming automatic renewal or continuous service charge at least fifteen days, but not more than forty-five days, before the cancellation deadline for such automatic renewal. The notice must also include instructions on how the consumer can cancel the renewal charge. The new amendment does not apply to any business, or its subsidiary or affiliate, subject to regulation by the NY Department of Public Service or the FCC. The bill became effective upon enactment.
Connecticut implements measures for auto-renewals
On June 28, the Connecticut governor signed HB 5314 (the “Act”), enacting measures relating to automatic renewal offers and consumer agreements. The Act, among other things, includes newly defined terms such as “automatic renewal provision.” The Act stipulates that any business that enters into a consumer agreement that contains an automatic renewal or continuous services provision must provide various consumer notices and enable any consumer who enters into such an agreement online to terminate online. Notices include a description of the actions the consumer must take to terminate, and if disclosed electronically, a link or other electronic means. Also, to be disclosed before renewal, in any consumer agreement containing an automatic renewal provision, must be the amount of the recurring charge and the amount of the change if the charges are subject to change (if such change in amount is known by the business). The business must further disclose the length of the term for such an agreement, unless the consumer chooses the length of the term, as well as any minimum purchase obligations and contact information for the business. The business must also establish a means for communication with consumers, such as email, toll-free phone number, or website if the agreement is contracted online. The Act also stipulates the nature of the disclosures for consumers before entering such an agreement, before the business makes a material change to the terms of the agreement, and before a consumer enters an agreement that offers a gift or free trial period. Additionally, the Act provides that no person doing business can impose any charge or fee for providing bills to consumers in paper form.
The Act is effective October 1.
Virginia and Kentucky enact requirements for auto renewals
Recently, Virginia and Kentucky enacted measures relating to automatic renewal offers and continuous service offers.
HB 1517 was signed by the Virginia governor on March 27 to amend the Consumer Protection Act in the Virginia code. The amendments provide that all businesses offering automatic renewals or continuous service offers that include a free trial lasting longer than 30 days are required to notify consumers of their option to cancel the free trial within 30 days of the end of the trial period. Providing this notice will avoid obligating a consumer to pay for the goods or services. Failing to timely notify a consumer is a violation of the Virginia Consumer Protection Act. Additionally, a business also violates the statute should it fail “to disclose the total cost of a good or continuous service [] to a consumer, including any mandatory fees or charges, prior to entering into an agreement for the sale of any such good or provision of any such continuous service.” HB 1517 is effective July 1.
SB 30 was signed by the Kentucky governor on March 23 to amend state law by adding sections addressing the termination of automatic renewal offers and continuous service officers. Among other things, the new sections define several terms, including “automatic renewal,” “automatic renewal offer terms,” “clear and conspicuous,” “consumer,” and “continuous service.” Businesses are required to provide clear and conspicuous automatic renewal or continuous service offer terms to consumers before the subscription or purchase agreement is fulfilled. Business also must obtain affirmative consent before charging a consumer’s credit or debit account or a consumer’s account with a third party. Additionally, businesses must (i) provide an acknowledgement that includes the terms, the cancellation policy, and information regarding how to cancel in a manner that can be retained by the consumer; (ii) give consumers appropriate mechanisms for cancellation; (iii) provide users who accept an automatic renewal or continuous service online the opportunity to terminate in the same medium; and (iv) provide a notice regarding material term changes. SB 30 outlines exemptions (including contracts entered into prior to the effective date), and states that first-time violators must “provide a prorated refund for the contract subject to an automatic renewal provision from the start of the most recent term to the date on which the business was notified of and corrects the error.” The state attorney general also may bring an action for injunctive and monetary relief against businesses that either fail to provide a prorated refund or where it is a business’s second or subsequent violation. SB 30 is effective January 1, 2024.
California passes legislation on automatic subscriptions
On October 4, the California governor signed AB 390, which amends and adds Section 17602 of the Business and Professions Code regarding automatic subscription renewals. The law applies to businesses conducting automatic renewal or continuous services offers to California customers. Among other things, the bill requires that: (i) notice be provided at least 3 days before and at most 21 days before the expiration of the period for which a fee gift or trial, or promotional or discounted price, applies; (ii) notice be provided at least 15 days and not more than 45 days before the automatic renewal offer or continuous service offer renews; and (iii) a business allow a consumer to terminate the automatic renewal or continuous service offer without engaging in steps that may delay the consumer’s ability to immediately terminate the policy. The bill also specifies that a “‘free gift’ does not include a free promotional item or gift given by the business that differs from the subscribed product.” The law takes effect July 1, 2022.