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The Auto-Renewal Law

In 2010, the California legislature adopted the Law in an attempt to curb what was perceived to be the unfair practice of consumer accounts being charged without their affirmative consent. Since then, many other states have adopted similar laws but California’s Section 17600 remains the most stringent. Generally, the Law requires that a company selling anything with an automatically renewing or recurring payment obligation provide the consumer with “clear and conspicuous disclosure” of the automatic renewal terms before the agreement between the parties is finalized. In other words, the notice that the consumer is about to enter into an automatically renewing subscription must be placed somewhere other than the embedded terms of service of the company’s website and displayed prior to finalizing their order.

In addition to the disclosure requirements, the Law requires that companies obtain affirmative consent from consumers before charging the consumer’s account on a recurring basis. Also, following the completion of a customer’s order, the company must provide an acknowledgement to the consumer of their assent to a recurring charge in a form that can be retained (most likely an email). 

Company Action Items 

The following steps should be considered by Company:

  1. On the finalize subscription page (where the “Start Your Subscription” button is located and payment information is entered), Company should provide a notice that clicking on “Start Your Subscription” will permit Company to charge customers for the service on a recurring basis.

  2. Company should implement specific terms and conditions governing their subscription sales that includes the following:

    • Notice that the subscription or purchasing agreement will continue until the consumer cancels.

    • A description of the cancelation policy that applies to the offer.

    • The amount of the recurring charge that will be made to the consumer’s account and any circumstances, if known, that would cause the amount to change.  If the amount may change, this term should describe the amount of the change, if known.

    • The length of the subscription term OR a statement that the term is continuous.

    • The minimum purchase obligation (if any).

  3. As part of the subscription process, Company should obtain affirmative consent from their customers to the terms and conditions governing the subscription offer. This may be accomplished either as a pop-up with an “I accept” button or a check-box that consumers must check before selecting to start their subscriptions. The “I accept” box should contain a link to the full terms and conditions.  It should also display the full text of the terms described above in sections 2(a)-(e).  These terms should be displayed in capital letters or in a different font or color than the rest of the text in the “I accept” box.

  4. After the consumer signs up for the subscription, Company should email the terms and conditions to the consumer.  In lieu of email, Company could offer the consumer an opportunity to download these terms and conditions.

  5. If Company materially changes the terms and conditions governing its subscription program, it should notify subscribers of the change by email. Email notification must be sent before the change occurs. The notification must provide instructions on how to cancel if the consumer so chooses. Because this notification may cause subscribers to cancel their subscriptions, Company should avoid changing the terms and conditions of its subscription service where possible.

  6. For existing customers, it would be advisable to send an email requesting that they log in, receive the disclosures in 2(a)-(e), and indicate an affirmative consent to the terms in a manner similar to (3).

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