On January 1, 2022, Colorado’s new automatic renewal law will come into effect; a complete revamp of the old statute. With its updated law, Colorado joins the ranks of states with some of the most extensive automatic renewal laws. Marketers and businesses who want to offer subscription services or other automatic renewal plans to consumers in Colorado must now carefully comply with the new law.
What are Automatic Renewal Agreements?
Automatic renewal contracts are arrangements in which paid subscriptions or purchasing agreements are automatically renewed at the end of a definite term on a recurring basis. Pursuant to Colorado’s updated law, renewal terms may not exceed one year (following the first contract period) unless consumers agree to longer terms. For automatic renewal contracts to be valid, marketers must get consumers’ express informed consent to the automatic renewal offer terms.
Clear and Conspicuous Disclosures of the Automatic Renewal Terms
Marketers must clearly and conspicuously disclose the automatic renewal offer terms, including: (1) that the contract will automatically renew; (2) the renewal term’s length; (3) the cancellation policy; (4) any recurring charges that will appear on consumers’ credit card or other payment method statements; and (5) the minimum purchase obligation, if applicable. Additionally, if there is a trial period, marketers must clearly and conspicuously disclose the amount to be charged and other obligations that they will incur after the free/discounted period ends.
Clear and Conspicuous. For program disclosures to be deemed clear and conspicuous, the material terms must: (1) appear in larger type; (2) be in contrasting type, font, or color; and/or (3) set off by symbols/marks that call attention to the text. If the disclosure is in audio form, the disclosure should be in a readily audible and understandable volume and tone.
Links. Marketers may use online links that direct consumers to a detailed disclosure of the automatic renewal offer terms. Such links must be: (1) available before a consumer elects to make a purchase; (2) appear directly adjacent to any link used by the consumer to purchase; and (3) labeled or directly adjacent to a clear and conspicuous disclosure that states that “by purchasing the good or service, the consumer agrees to enroll in an automatic renewal contract.”
Simple Cancellation Mechanism
Marketers must provide a “simple, cost-effective, timely, easy-to-use, and readily accessible mechanism for canceling an automatic renewal contract or trial period offer.” An example of a simple to use mechanism can be a one-step online cancellation link on the marketer’s website that is immediately available or available after completing a reasonable authentication protocol.
Yearly Reminders of the Automatic Renewal
Marketers must notify consumers that the contract will automatically renew for another term unless they cancel it. The notice must include the cancellation process and clear, accurate information about the sending marketer’s identity. Marketers may send this notice by physical mail, email, or another easily accessible form of communication (such as text message) if authorized by such consumers.
Generally, Colorado’s law requires marketers to send yearly notices to the subscribers 25-40 days before the anniversary of the subscriber’s enrollment date (e.g., if the consumer signed up for a monthly subscription on 6/26/21, the notice could be sent on 6/1/22). For annually renewing subscriptions, marketers must send the notices prior to each renewal. For subscriptions with renewal terms of shorter than one year, marketers must send the notices 25-40 days before the term that will extend the subscription beyond the subscriber’s enrollment anniversary (e.g., if the consumer signed up for a 7-month subscription on 6/26/21, the notice could be sent on 1/1/22).
Entities Regulated by Colorado’s Automatic Renewal Law
It is important to note that Colorado’s automatic renewal law covers most, but not all, subscriptions plans. The law does not extend to automatic renewal plans created by certain entities, such as those regulated by the Division of Insurance; licensed banks or bank holding companies and their affiliates; and licensed credit unions or other financial institutions.
If you are interested in learning more about this topic or require assistance with setting up an automatic renewal marketing plan, please email us at info@kleinmoynihan.com, or call us at (212) 246-0900.
The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.
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