NOTE: This article and the accompanying survey of automatic renewal laws were updated on March 21, 2019.
From streaming music and television to diaper and grocery deliveries, subscription services have become part of consumers’ daily life. However, while these subscription services — which enable customers to continue receiving a prescribed service, perhaps indefinitely, without having to hit “purchase” for each transaction — are clearly popular, they also create potential for abuse, and consumer protection regulations are beginning to catch up. While businesses are likely familiar with the Restore Online Shoppers Confidence Act (ROSCA), which the federal government sanctioned in 2010, they must now stay abreast of a growing number of state regulations.
Several states have had laws in place for many years regulating “automatic renewals” or “evergreen clauses” in contracts, but these laws regulated a particular service, like home alarm products, health club memberships or home repair services. However, over the last two years, individual states have enacted regulations to protect consumers from unknowingly entering into other types of subscription services agreements, including some laws that broadly regulate “service contracts” or “continuing service.” The laws spell out what must be disclosed to the consumer and at what point in the transaction it must be disclosed. Some states, like Oregon, California, and now Virginia, even specify details on how the consumer must be able to cancel the subscription services. As of today, roughly half of the states have some sort of regulation in place, and twelve states are currently proposing bills.
On July 1, 2018, California’s amendment to its already consumer friendly law went into effect, requiring businesses who offer subscriptions on a free gift or trial basis clearly and conspicuously disclose whether the price will be charged after the trial ends and requires businesses to provide consumers the option to terminate some offers online (e.g., through an email or other online format). Virginia recently passed a law effective January 1, 2019 with requirements very similar to California’s law; the District of Columbia passed a law effective upon signature from the mayor (February 2019) with a second opt-in requirement after a free trial; and Vermont passed a law with a more stringent opt-in requirement, effective July 1, 2019.
It is important for businesses to stay apprised of and understand these ever-changing regulations, because the penalties for failing to comply can be severe, ranging from rendering the subscription services contract null and void to a violation of the state’s unfair and deceptive practices act. Some states, like Virginia, provide for a private right of action for affected consumers.
To help businesses prepare for and comply with all state laws, we’ve updated our survey of automatic renewal laws in all 50 states. The guide includes detailed overviews of existing automatic renewal laws in each state, as well as up-to-date information about proposed automatic renewal laws currently pending legislative action.