New Updates to California’s Auto-Renewal Law Have Important Implications for Businesses

In November, an update to California’s auto-renewal law passed the state legislature, officially restricting the requirements on companies that use automatically renewing payments from consumers to provide subscription services.

California’s Auto-Renewal Law Gets Update to Protect Consumers

A number of different class action suits have been filed due to alleged violations of California’s auto-renewal law after consumers did not realize what they were signing up for or found it difficult or impossible to cancel.

California’s auto-renewal law was originally enacted in 2010, requiring any company making use of auto-renewal consumer contracts to disclose these trends conspicuously and clearly, to provide an acknowledgement that contains the cancellation policy, a simple cancellation method and the terms, and to get consumer consent before imposing any charges.

The Rise in Claims of Auto-Renewal Violations and Problems

Many companies have come under fire in recent years, from online service offerings to providers of gym memberships, alleging that consumers are not given enough information when they sign up.

Some of these consumers argue they only find out about a subscription plan after it’s been charged to their bank or credit card. Complicating matters is the fact that more companies than ever are using a free trial offer to encourage people to sign up.

The 2010 requirements of California’s auto-renewal law are being updated with new mandates for companies to give conspicuous and clear explanations of any changes to the purchase or price agreement to be charged after the conclusion of a free trial or a free gift.

In addition, companies must now obtain affirmative consumer consent for non-discounted pricing before they bill the consumer, must provide an exclusively online mechanism for canceling the service for anyone who originally approved the service agreement online and gives upfront disclosure about how to cancel an automatic renewal before payment is charged for a continuing service after the trial or free gift has concluded.

The California auto-renewal law has a primary purpose of enabling consumers to entirely understand any recurring commitment they make. Businesses often choose to satisfy such a requirement by using contrasting, larger or text set off from the rest of the information on the page provided to consumers.

Now, however, businesses will have even more responsibility; under the updated law, any material change in the terms of the subscription must also enable consumers to opt out before that change takes effect.

Any subscription-based company in California that falls under the umbrella of this rule has to explain to customers directly how to cancel subscriptions and must also use a letter or an email following any order to tell them how to do so easily.

Under the updated law, consumers must also be given the opportunity to opt out before the subscription kicks in. This change could have important implications for many businesses now making use of the subscription and auto-renewal method.

If you believe that you have been subjected to a violation of California’s auto-renewal law, you may need help from experienced attorneys. Schedule a consultation today with the lawyers at Bradley/Grombacher.

Note: Bradley/Grombacher is not representing the plaintiff in this lawsuit. 

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