On July 1, 2022, California Assembly Bill No. 390 (the “Amended Law”) will go into effect. The Amended Law revised Section 17602 of California’s Business and Professions Code, requiring businesses to adapt to a stricter Automatic Renewal Law (“ARL”). After July 1, companies offering automatically renewing subscription services to California State customers must, among other things, clearly and conspicuously notify consumers, within the applicable notice period, of how to cancel their subscriptions.
New Revisions
Pursuant to the amended California Automatic Renewal Law, businesses will now be required to:
- send an additional notice explaining how to cancel 3 to 21 days before the expiration of a free trial or promotional price that lasts more than 31 days;
- permit customers who sign up online to cancel their automatic renewal contracts immediately and at will through: a) a direct link; b) button on the website; or c) a pre-formatted email (that the customer merely needs to click send); and
- send a reminder notice to customers 15 to 45 days before renewal of subscriptions with an initial term of one year or longer.
California Automatic Renewal Law
Prior to the amendment, the California ARL had made it unlawful for businesses to:
- make an automatic renewal offer to California consumers without first presenting the automatic renewal terms and conditions in clear and conspicuous language;
- charge customers for an automatic renewal offer without first receiving affirmative consent;
- materially change any automatic renewal terms without notifying customers; and
- fail to provide customers with a readily accessible mechanism (available at all times) for canceling their contracts.
In addition, California’s ARL requires businesses that market automatic renewal offers that include free trials or discounted prices to:
- include a clear and conspicuous explanation of the price that will be charged after the trial period ends; and
- obtain customers’ consent prior to charging their credit or debit cards for automatic renewals after the promotional or discounted price period ends.
Make Certain Your Business is Compliant with Automatic Renewal Laws
California tends to be on the forefront of adopting stricter consumer protection laws. It is a best practice for online and mobile marketing companies to comply with the strictest of state laws and apply these restrictions across the board in all jurisdictions. Businesses that fail to comply with automatic renewal laws risk being named in crippling class action lawsuits in many jurisdictions.
Given the foregoing, companies that offer free-to-pay conversions and continuity programs should consult with experienced counsel to ensure that their offerings are compliant with automatic renewal laws. If you are interested in learning more about this topic or need assistance with setting up an automatic renewal marketing program, please e-mail 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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This blog post was originally published on July 6, 2018 and updated on April 22, 2022.
Photo by Artem Beliaikin on Unsplash
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