Automatic Subscription Renewals Increasingly the Target of Litigation

Automatic subscription renewals have increasingly become the subject of complaints by unwitting consumers who think they’re just signing up for a free trial or enrolling in a subscription service for a defined time period.

In response to consumer outcry, 22 states have passed laws dictating the terms for automatic subscription renewals, and an another eight states introduced legislation in 2017 to restrict the practice, according to Stateline, which reports and analyzes trends in state policy.

In an interview with the publication, New Jersey Assemblyman Daniel Benson characterized automatic subscription renewals as “zombie contracts.”

“They seem to never die,” he said. “You see those charges and try to cancel, but you’re too late and it keeps repeating itself,” said Benson, who has repeatedly attempted to pass an auto-renewal bill in New Jersey.

Also known as a “negative option” or an “evergreen clause,” automatic subscription renewals allow businesses — think cell phone carriers, cable companies, magazines and gyms — to automatically renew a consumer contract for the same period of time as the initial term unless the consumer states, in writing, the desire to cancel.

Stateline reports that some of the ways states are restricting the long-held automatic subscription renewal practice is by requiring that businesses:

  • Disclose their automatic renewal policies upfront and in a clear and conspicuous manner
  • Secure “express consent to renew” before applying any charges
  • Provide written notice detailing how to opt out before the cancellation deadline passes and a renewal charge is applied.

MultiState Insider, a publication put out by of state and local government relations services firm MultiState Associates, reports that since enacted in 2010, California has some of the nation’s strictest automatic renewal clause requirements, such as prohibiting companies from charging consumers’ credit cards without affirmative consent to renew the contract and requiring that service providers offer “‘easy-to-use’ mechanisms to cancel the contract.”

Computerworld advises websites who engage in automatic subscription renewals to “carefully vet their subscription renewal policies” due to a flurry of lawsuits being filed over the practice.

“Though most cases are still in early stages or have been driven into arbitration, this new brand of litigation could become more than a nuisance if it succeeds on a class-wide basis,” Computerworld warns.

According to Computerworld, two California plaintiffs’ lawyers are using the Golden State’s 2010 statute prohibiting automatic renewal charges without affirmative consent to “target” technology and other subscription-based services companies engaging in the practice.

Plaintiffs’ lawyers suits maintain that retailers are required to compensate consumers with restitution “100 percent of gross revenues received pursuant to the automatic renewal, even if the consumer actually wanted or anticipated the renewal.”

The complaints, according to Computerworld, seek restitution for unauthorized charges as low as $1.99 per customer.

Music, podcast, and video streaming service Spotify was the first company to be hit with an automatic subscription renewal lawsuit in California followed by y class actions filed against Dropbox in February 2014 and Hulu in March 2014.

In 2015, California web-based and tech companies were the subject of more than a dozen auto subscription renewal class action lawsuits and in 2016 more were filed, according to Computerworld.

If you believe a company may have violated automatic renewal laws, contact an experienced attorney with Bradley/Grombacher. 

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

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