Governor Gavin Newsome signed AB2863 into law on September 24, 2024, amending California’s automatic renewal law – making it the most stringent state measure in the United States. As businesses that operate online are aware, California is one of the most aggressive when it comes to consumer protection in the realm of e-Commerce. Note that even before amendment, a litany of complaints had been filed by California-based plaintiffs for alleged automatic renewal law violations.
As co-author Assemblywoman Shiavo stated in announcing the amendments, California is attempting “to set[] a model for the nation on protecting consumers from unnecessary charges.” Businesses engaged in e-Commerce with California State residents need to familiarize themselves, and ensure compliance, with the statute’s updates. Failure to do so may result in unwelcome regulatory investigation and legal action. The amendments to California’s renewal law take effect on July 1, 2025.
California’s Automatic Renewal Law Prior to Amendment
California’s Automatic Renewal Law, codified in California’s Business and Professions Code (“BPC”) Sections 17600 – 17606, originally took effect in December 2010. The California legislature designed the statute to regulate automatic renewal and continuous service offers directed towards California State consumers. Essentially, the renewal law was enacted in an effort to end the practice of continuously charging consumers for goods or services without obtaining their affirmative consent. Section 17602, which contains the statute’s key provisions, makes it unlawful for businesses to:
1) fail to present automatic renewal terms in a “clear and conspicuous manner” before the subscription is agreed to, and in visual proximity to the request for consumer consent;
2) charge the consumer’s credit card, debit card, or account without first obtaining the consumer’s affirmative consent to the agreement containing the auto-renewal provisions; or
3) fail to provide the consumer with an acknowledgement containing the automatic renewal terms and cancellation information in a format that can be retained by the consumer.
Key Updates to California’s Automatic Renewal Law
The California legislature left no stone unturned when deciding which provisions of its automatic renewal law to revisit. Below are some of the important amendments.
- If a business changes the fee charged to a consumer under a preexisting automatic renewal or continuous service subscription, the business shall provide the customer, “no less than 7 days and no more than 30 days before the fee change takes effect,” with: 1) clear and conspicuous notice of the fee change; and 2) information regarding how to cancel the subscription in a manner that the consumer is able to retain.
- If a consumer attempts to cancel or terminate an automatic renewal or continuous service plan, a business may attempt to retain the customer by presenting a discount offer or other benefit so long as, when the cancellation attempt is: 1) made online, a “click to cancel” button is simultaneously and prominently displayed alongside the retention offer; or 2) made via telephone, the business must first clearly and conspicuously inform the customer that he/she may complete the cancellation process at any time by saying “cancel,” or words to that effect, before conveying the retention offer.
- If a consumer accepts a free gift or promotional trial lasting for more than 31 days, notice shall be provided no less than 3 days and no more than 21 days prior to the expiration of the gift or promotional pricing that the plan will convert to a paid/full-price subscription and continue until cancelled.
- Businesses must maintain verification of the consumer’s affirmative consent to the offer terms for at least three years, or one year after the contract is terminated, whichever period is longer.
Please note that although California’s automatic renewal law does not provide for a private right of action, plaintiffs typically tether their claims under the statute to the Unfair Competition Law and Consumer Legal Remedies Act, which afford remedial measures, monetary damages, and attorneys fees.
Hire Experienced Marketing Attorneys to Comply with the Latest Updates to California’s Automatic Renewal Law
The aforementioned are but a few of the many statutory updates enacted by the State of California. As both Governor Newsome and Assemblywoman Shiavo have declared, the goal of the AB2863 amendments is to strengthen consumer protections for Californians and help them save money. To that end, California’s newly-amended automatic renewal law extends beyond the protections afforded by the Federal Trade Commission’s prospective automatic renewal law. With respect to some consumer regulatory protections, such as those in the negative option space, California is of the opinion that the FTC’s guidance should be seen as a floor and not a ceiling.
The changes described in this blog will apply to contracts entered into after July 1, 2025. California businesses should be proactive in ensuring compliance with the State’s automatic renewal law. Hiring experienced counsel to review consent language and compliance procedures could save businesses great expenditure and headache down the road. The attorneys at Klein Moynihan Turco have significant experience in defending businesses against regulatory actions involving state automatic renewal laws and assisting them with compliance so that future claims may be prevented.
If you require assistance with California automatic renewal law compliance or related regulatory defense, please email us at info@kleinmoynihan.com or call us at (212) 246-0900.
The material contained herein is provided for information 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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Photo by Wesson Wang on Unsplash
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