California's proposed Automatic-Renewal Law (ARL) passed the state Legislature earlier this month, tightening the requirements on companies that sell subscription services with automatically renewing payments to consumers. The new law comes on the heels of a flurry of class actions suits filed under California's previous ARL enacted in 2010. The 2010 ARL required auto-renewing consumer contracts to disclose terms clearly and conspicuously, obtain affirmative consumer consent before imposing a charge, provide an acknowledgment that contains the terms, the cancellation policy, and provide a simple cancellation method.
The new ARL incorporates the requirements of the 2010 version, and has the additional requirements of clear and conspicuous explanations of any updates to the price or purchase agreement to be charged after a free gift or trial concludes, affirmative consumer consent to non-discounted pricing prior to billing, disclosure of how to cancel automatic renewal prior to payment for the continuing service after a free gift or trial, and an "exclusively online" cancellation mechanism for consumers who originally accepted the service agreement online.
Takeaway: Companies that sell subscription services with automatically renewing payments to consumers in California should update their practices to conform to this new ARL.
This article is presented for informational purposes only and is not intended to constitute legal advice.
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