Washington, DC, Adds Auto Renewal Law

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The nation’s capital joined the growing number of states regulating automatic renewal contracts when Mayor Muriel Bowser signed the new law into effect this month.

Pursuant to the Structured Settlements and Automatic Renewal Protections Act of 2018, businesses using auto-renewal contracts are required to “clearly and conspicuously” disclose both the auto-renewal provision and the cancellation procedure in the contract.

If the contract has an initial term of 12 months or more that will automatically renew for a term of one month or more unless the consumer cancels the contract, the business must notify the consumer of the first automatic renewal and thereafter annually by first-class mail or email. If the consumer provides specific authorization to use another form of communication—such as text message or app—then notice can be provided that way.

The notice itself must be sent to the consumer no fewer than 30 days and no more than 60 days before the cancellation deadline for the first automatic renewal. It also must clearly and conspicuously include several disclosures: the fact that unless the consumer cancels the contract, it will automatically renew; the cost of the goods or services for the term of the renewal; the deadline by which the consumer must cancel the contract to prevent automatic renewal; and the methods by which the consumer may obtain details of the automatic renewal provision and cancellation procedures. Active weblinks must be included if the notice is provided via email.

Free trials with an automatically renewing contract attached are also covered by the new law. Notice of the auto-renewal must be given to consumers between one and seven days before the expiration of the free trial period, and the business must obtain the consumer’s affirmative consent to the auto-renewal before charging the consumer, notwithstanding the consumer’s consent to the free trial.

A violation of the new law will render the automatic-renewal provision void, will terminate the contract at the end of the term in which the violation occurred, and will constitute a violation of the District of Columbia Consumer Protection Procedures Act unless the business can demonstrate that it established and implemented written procedures to comply with the law, that its failure to comply was the result of a good faith mistake, and that the consumer received a credit for all amounts billed or a refund for all amounts paid due to the mistaken renewal.

To read the new law, click here.

Why it matters: Regulation of automatic renewal contracts looks to be a hot trend in 2019, with the enactment of the Washington, D.C., law, recent updates to California’s statute and new legislation in Vermont becoming effective on July 1, 2019.

 

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.

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