July 11, 2022

Key Changes to California’s Automatic Renewal Law Are Now in Effect

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Pillsbury Winthrop Shaw Pittman LLP

Businesses offering subscription services or other automatically renewing agreements to California consumers must adhere to new notice and cancellation requirements or face the risk of significant liability.

TAKEAWAYS

Businesses must now provide additional notice prior to certain renewals.

Businesses must also provide additional online cancellation options.

Those who fail to comply with these new requirements risk both private class action litigation and government enforcement actions.

On July 1, 2022, the new version of California’s Automatic Renewal Law (ARL) went into effect. First passed in 2009, the ARL aims to ensure that businesses receive clear and continuing consent from California consumers in connection with recurring charges for products and services. The recent changes to the ARL, enacted this past fall as Assembly Bill 390, build on the law’s existing framework by adding new notice requirements prior to certain renewals, and by also adding mandatory online cancellation options.

Renewal Notice

The ARL now requires that businesses give additional notice to consumers prior to two types of automatic renewals. First, additional notice is required where renewal follows a free or discounted trial period of over 31 days. Second, additional notice is required where renewal follows an initial term of one year or longer. In both cases, this notice must be provided within a specified period and must include various information, including the terms of the renewal, that the renewal will be automatic absent cancellation, and how to cancel.

Online Cancellation

The ARL’s other key new requirement relates to cancellation options. Where a business allows a consumer to accept an automatic renewal agreement online, it must now also allow the consumer to terminate the agreement “exclusively online, at will, and without engaging any further steps that obstruct or delay the consumer’s ability to terminate.” New language in the ARL also prescribes a limited set of acceptable methods for providing an online termination option, including a prominent link or button and a preformatted email.

Key Risks

Even before these changes, the ARL has been a frequent focus of both private class action litigation and government enforcement actions. ARL class actions frequently settle in the seven figures, and earlier this year a popular weight-loss app settled such an action for over $60 million. On the enforcement side, several California district and city attorneys have joined forces to pursue ARL claims as the California Auto Renewal Task Force (CART). In recent years, CART has also reached several seven-figure settlements, including with a direct marketing company for over $8 million and with the owner of several online dating sites for over $2 million.

Any business providing subscription services in California should take these new requirements seriously and consult with counsel to ensure compliance.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.