Across the country, indignant consumers and plaintiffs lawyers are pursuing companies who use automatic renewal clauses for subscription-based services. California auto-renewal laws provide some of the strictest rules in favor of consumers.
An automatic renewal clause, also known as a self-renewal or evergreen clause, allows companies to automatically renew contracts — think magazine subscriptions, gym memberships, content streamers, online dating sites, service contracts and free trials — for the same amount of time as the initial contract unless the customer provides a written notice to terminate. The charges are automatically billed to customers’ credit card, debit card or third-party accounts, like PayPal, often going unnoticed.
This practice provides an uninterrupted revenue stream for the company but is drawing the ire of consumers nationwide.
California enacted legislation in 2010 that’s considered among the “most stringent” in the country when it comes to automatic renewal charges, according to legal website JDSUPRA.com.
California’s auto-renewal laws require that companies provide customers with the renewal terms in a “clear and conspicuous” manner. The terms must be posted close to the request for consent for automatic renewal or within a close time period of when the request is made. Before charging customers, California auto-renewal laws require customers give the company the company “affirmative consent.”
The company must also provide the customer with its cancellation policy, the automatic-renewal terms and instructions on how to cancel the subscription, such as an email address, a phone number or mailing address.
California is ground zero for automatic-renewal disclosure class action lawsuits, JDSupra.com reports.
The site cautions that “to avoid being targeted, companies offering subscription service programs, automatic renewals, and free trials should carefully review their compliance with California law and make any necessary changes to their sign-up process to provide clear and conspicuous disclosure, obtain affirmative consent, and provide an appropriate acknowledgement to the consumer.”
The California Senate in April 2017 passed a bill aimed at transparency in auto-renewals, according to LA Weekly.
The legislation would compel “three to seven days’ notice when a company is about to hit up your account for a renewal — and it says those firms must make it as easy to stop that process as it was to sign up in the first place,” LA Weekly reported.
“Consumers need to know what they are buying and under what terms, and what they need to do to cancel the arrangement,” the bill’s sponsor, California Sen. Bob Hertzberg of Van Nuys, told the publication.
Those who oppose the legislation, according to Richard Holober, executive director of the Consumer Federation of California, are “direct marketers, multiple Silicon Valley lobbying groups and the California Newspaper Publishers Association.
The Consumer Federation of California’s Holober said Hulu, Dropbox, Proactiv and Spotify “have been targeted by class-action lawsuits over automatic renewals.”
While previous federal court decisions have found that California auto-renewal laws do not meet the threshold for a private citizen’s right to sue, a March 2017 article in legal analysis website lexology.com notes that previous plaintiffs in these types of cases have not alleged that they did not want, or did not try to cancel, the services.
“The implication is that such allegations might satisfy (California’s Unfair Competition Law) standing requirements of injury-in-fact and loss of money or property,” according to the analysis. “It’s not hard to imagine that some plaintiffs will begin to add these allegations in future (California auto-renewal laws) complaints. And it remains to be seen how courts will address them.”
In July 2017, a California federal judge decided that a lawsuit against music streaming service Spotify had some merit because a violation of California auto-renewal law could be considered an unlawful act — a necessary predicate for filing a claim (and a class action lawsuit) under the state’s Unfair Competition Law.
LEGAL HELP FOR UNLAWFUL AUTOMATIC RENEWAL CHARGES
If you believe a company may have violated automatic renewal laws, you may be eligible to file an automatic renewal lawsuit in order to recover damages.
An experienced attorney with Bradley/Grombacher who is familiar with issues surrounding automatic renewal laws can provide you with a free case review and consultation to discuss your unique situation, and can help you decide if proceeding with legal action is right for you. Fill out the form on this page now!