New Rules For Businesses Offering Automatic Renewals To Their Customers
Governor Jerry Brown recently signed SB 313, which is a significant change in law for businesses offering automatic renewals of contracts for their goods or services. The legislative counsel’s digest described the new law as prohibiting businesses from “charging a consumer’s credit or debit card, or the consumer’s account with a 3rd party, for an automatic renewal or continuous service that is made at a promotional or discounted price for a limited period of time without first obtaining the consumer’s consent to the agreement.”
Commencing on July 1, 2018, Business and Professions Code Section 17602 as amended by SB 313, will require that businesses who offer automatic renewals or continuous services that include a free gift or trial will also have to include a clear and conspicuous explanation of what happens to the price when the trial period ends. Businesses will also have to disclose how to cancel, and allow cancellation of the automatic renewal, before the consumer pays for the goods or services. To allow cancellation under the new law, businesses will have to provide consumers with an easy method such as a toll-free telephone number, electronic email address, or mailing address. Yet if the consumer accepts an offer online, they must be able to cancel online. And further, if there are any material changes to the terms of the automatic renewal or continuous service, the new law requires that the consumer receive a clear and conspicuous statement of the changes.
This new law applies only to businesses that offer automatic renewals or continuous services to consumers. Businesses that offer automatic renewals or continuous services should become familiar with the new law and change their policies in an effort to avoid violations.