If you’re one of the 79 percent of Americans who shop online, you’re probably familiar with the “automatic renewal” – a subscription, membership or service through which one purchase turns into a dozen. Automatic renewals can be convenient, but they can also bring unwanted purchases and unwieldly red tape.
The California Automatic Renewal Law exists to stop companies from tricking customers into long-term contracts. Later this year, the law will be strengthened with new measures designed to bring more transparency and fairness to free trials and “limited time offers.”
What is the California Automatic Renewal Law?
California’s Automatic Renewal Law (ARL) was enacted in 2010; it was designed to protect consumers from unknowingly signing up for automatic-renewal or continuous-service programs. It applies to individual consumer contracts that have automatic renewal features, through which customers authorize recurring charges to their credit cards or bank accounts for products, services, memberships or subscriptions.
The ARL places several requirements on companies that sell to California residents – regardless of their location. In online and hard-copy contracts, companies must:
- Present any automatic renewal terms in a “clear and conspicuous” manner, such as a larger type size, font or color.
- Obtain affirmative consent before charging a customer’s account.
- Provide a confirmation that includes the automatic renewal terms, cancellation policies and instructions on how to cancel the agreement. The customer must be able to access and keep this information.
Companies must communicate any changes to their automatic renewal process and provide direct contacts for cancellation, such as toll-free numbers, email addresses or postal addresses.
Some types of businesses, such as banks, utilities and insurance companies, are exempt, but most Internet merchants are subject to the ARL. Lawsuits have been brought against companies selling cosmetic subscriptions, online dating and document storage, among others.
If companies violate this law, they may have to return all proceeds collected from California customers.
What is Changing with the ARL?
An update to the law will take effect on July 1. It addresses consumer complaints against businesses that offer free samples or trials, followed by automatic renewals.
Now, under the ARL, companies must:
- Provide a “clear and conspicuous explanation” of the price that will be charged after a trial period.
- Obtain affirmative consent before billing.
- Tell customers how to cancel an automatic renewal program before the free trial period expires.
In addition, if consumers can sign up for programs online, they must be able to cancel online.
The law’s author, Sen. Bob Hertzberg (D-Van Nuys), was quoted in the Los Angeles Times: “Consumers need to know what they are signing up for and that they can just as easily cancel any service or subscription online as when they started it online.”
The full text of the ARL revisions are available here.
Have you struggled to stop an automatic renewal? Have you seen unscrupulous advertisers in California? Keller Grover represents consumers who are victims of fraudulent, unfair and anti-competitive business practices. Contact us at 866-663-3308 for a free consultation.