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Review Your Enrollment Processes Now: California Enhances Its Automatic Renewal Statute

Many marketers rely on advance consent auto-renewal programs, particularly for online subscription sign-ups.   In the wake of the booming subscription-based business model and a rise in class action filings under state automatic renewal laws, many states are enacting or updating their laws to strengthen consumer protection.  California’s recently enacted Senate Bill 313 enhances what was already one of the most stringent auto-renewal laws in the nation.

Effective July 1, 2018, the new California Automatic Renewal Law amends Section 17600 of the Business and Professions Code.  Among other things, the revised law

  • Requires businesses making a continuous service offer that includes a free gift or trial to include in the offer a “clear and conspicuous” explanation of the price that will be charged after the trial ends or the manner in which the pricing will change upon conclusion of the trial;
  • Prohibits businesses from charging a consumer’s credit or debit card or third-party account for an automatic renewal without first obtaining the consumer’s consent;
  • Requires businesses to disclose how to cancel the continuous service before the consumer pays for the goods or services; and
  • Mandates that companies provide an online cancellation mechanism for consumers who accepted the automatic renewal offer or continuous service offer online.

TAKE AWAY: Compliance with the California auto-renewal law is critical for in-state and national advertisers.  California is notorious for private plaintiff actions, including claims under California’s Unfair Competition Law.  In addition, a number of California District Attorneys have begun pursuing auto-renewal programs under a joint task force.   Given the current scrutiny of auto-renewal programs, marketers should take the time to re-examine their auto-renewal programs now before the change goes into effect on July 1, 2018.

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