Automatic Renewal Charges
Once confined to the realm of magazine subscriptions, automatic renewals are now popular in all sorts of industries from retail goods and supplies to digital services, transportation services, membership fees and everything in between.
Businesses that employ an automatic renewal clause often offer a discount to consumers when goods and services are purchased using automatic renewals, and many startup businesses have been able to successfully launch using a subscription-based model. Consumers appreciate the simplicity and cost savings of these automatic renewals, but these subscription setups have caused issues as well.
Consumers have issued a number of complaints about automatic renewal charges, including that they were not clearly made aware of the terms of the automatic renewal or that the renewal clause was unclear. Many consumers also state that following a free trial period, they were plagued by automatic renewal charges when they never opted in to the paid services.
What Must Businesses Do to Comply with Automatic Renewal Laws in California?
California has some of the strictest laws and regulations in the country for just about any area affecting consumers, such as consumer false advertising, wage and hour laws, carcinogenic product labeling, and more. It is not surprising that automatic renewal laws in California are some of the strictest as well.
Currently, at least 15 other states are known to have enacted legislation that governs the use of an automatic renewal clause as part of a business model. New York has a law similar to California, and Connecticut, Florida, Georgia, Illinois and Oregon also have fairly strict statutes.
California’s automatic renewal laws are contained within the California Business and Professions Code 17600-17606. These laws were enacted on December 1, 2010.
Under the California automatic renewal laws, businesses are required to adhere to the following:
- The business is required to present the terms of the automatic renewal clause in “clear and conspicuous” language which should be set apart from the surrounding text by using a larger type, contrasting font or color, and set aside by symbols or other marks in such a way that “clearly calls attention to the language” of the automatic renewal terms.
- The business is required to obtain affirmative consent from consumers before charging their credit card or debit card account for the automatic renewal of the subscription-based service.
- The business must provide an acknowledgment that describes the automatic renewal clause was offered. It must include terms of the continuous renewal as well as the related cancellation policy. Information on how to cancel the subscription must be “capable of being retained by the consumer.” Notice of material changes to the terms of service must be clear and conspicuous as well.
- Under section 17603 of the California Business and Professions Code, the regulation states that if a business sends goods or products to a consumer without having first obtained affirmative consent from the consumer, “the goods, wares, merchandise, or products shall for all purposes be deemed an unconditional gift to the consumer” and the consumer shall not bear the responsibility of any related costs for the items or their shipping.
Federal Automatic Renewal Clause Enforcement
States must not only comply with their state-specific automatic renewal laws, but they must also follow regulations specified under the Federal Trade Commissions Act, 15 U.S.C. Section 41, et seq., which sets up requirements for companies to disclose their auto renewal clause policies in an honest and clear manner.
Some automatic renewal lawsuits filed under this FTC Act have involved free trials of a subscription-based service where the company charged the consumer for the service after the trial had ended. One such automatic renewal lawsuit was filed in 2015 against DirecTV. The company later admitted to having charged customers after their free trial of premium channels had concluded, but claimed that the terms of the promotion were disclosed to consumers in a clear and conspicuous manner.
Automatic Renewal Lawsuit Filings
A class action lawsuit was filed in California against music and video streaming service Spotify (Bleak v. Spotify USA, Inc., Case No. 3:13-cv-05653) alleging the company failed to obtain affirmative consent for the automatic renewal clause when it continually charged consumer debit and credit cards for the subscription. A confidential settlement was reached in this case.
A total of 44 states and the District of Columbia brought an automatic renewal lawsuit against Sirius XM Radio Inc. a few years back which resulted in a $3.8 million settlement to resolve allegations that the company engaged in misleading and unfair advertising.
Other automatic renewal lawsuits have been filed against Blizzard Entertainment Inc., producer of the popular “World of Warcraft” game; SeaWorld Entertainment Inc.; food delivery service Blue Apron Inc.; and Tinder, among other companies using automatic renewal options.
Filing Your Own Automatic Renewal Lawsuit
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!