In the United States, consumer-facing companies must comply with not just one set of laws but the laws of all 50 states. Eversheds Sutherland presents periodic consumer-related updates to inform companies entering or already established in the US market about newly enacted rules and regulations and to highlight already- existing laws that may be traps for the unwary. The purpose of these updates is to emphasize the varying approaches in different states and educate companies on particular unique state consumer laws in the hopes of avoiding or minimizing potential litigation. Today’s update focuses on the laws in California pertaining to the parameters of automatic renewals of customer subscriptions.

Consumer-facing businesses that offer subscription-based products should be aware of Automatic Renewal Laws (ARL) proliferating across the country. As one of the most plaintiff-friendly states in the country, California’s ARL, Cal. Bus. & Prof. Code § 17602 et seq., summarized below provides an overview of what companies should be including in their automatic renewal provisions.

California’s ARL requires businesses that utilize automatic renewal or continuous service to display the material terms of any offer, including such provisions to the consumer clearly and conspicuously. Cal. Bus. & Prof. Code § 17602(a)(1).

Under the law, businesses must request and obtain the consumer’s consent to the automatic renewal provision alongside the below material disclosures and prior to the point of sale. Cal. Bus. & Prof. Code § 17602(a)(4).

These disclosures must include, among other things:

1. The subscription will continue until cancellation.
2. A description of the cancellation policy.
3. The recurring charges that will be charged.
4. The length of the automatic renewal term, unless the length of the term is chosen
   by the consumer.
5. If the automatic renewal provisions include a promotional period that lasts more than 31 days, the business must provide a reminder notice between three and 21 days before the promotion’s expiration.
6. If the automatic renewal provision includes an initial term that lasts for one year or longer, the business must provide notice between 15 and 45 days before the date of renewal.

Cal. Bus. & Prof. Code § 17602(a)(4)-(b)(2).

California’s ARL also mandates that businesses cannot create further steps that delay the consumer’s ability to “immediately” cancel the renewing subscription. Cal. Bus. & Prof. Code § 17602(d).

Other states with similar laws include the District of Columbia, Florida, Georgia, Hawaii, Illinois, Louisiana, New York, New Mexico, North Carolina, Oregon, Vermont and Virginia. However, as noted above, each law will vary slightly by state. For example, the Virginia law provides that all businesses offering automatic renewals that include a free trial lasting longer than 30 days (as opposed to 31 days in California) are required to notify consumers of their option to cancel the free trial within 30 days of the end of the trial period. VA HB 1517.

Companies need to remain vigilant that their automatic renewal terms remain in compliance with state law requirements to minimize potential consumer protection litigation.

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