Subscription-based services are all the rage right now. From HelloFresh and Netflix to BlueApron and Hulu, it can be challenging to manage your monthly subscriptions.
As a result of more subscription services emerging, some state legislatures are concerned about protecting consumers from hidden fees or auto-renewals.
Several states have passed auto-renewal laws. The Federal Trade Commission (FTC) even provides helpful consumer advice regarding auto-renewals on its website. No one wants to end up paying for a subscription after a free trial or if they decide the service is no longer needed.
California is the most recent state to pass an auto-renew law to help keep consumers safe from unnecessary charges for subscription services. Learn more about the new law, what this means for consumers, and how it may impact streaming services.
Understanding California’s new auto-renew law
On July 1, California’s Assembly Bill 390 took effect, which added notice and cancellation requirements for companies offering subscriptions to consumers. The bill was added to California’s existing Automatic Renewal Law (ARL).
In simple terms, companies with subscription-based business models and automatic renewal techniques must comply with certain rules.
How the law affects subscription-based businesses
According to the law, companies have to allow customers who’ve signed up for a subscription to terminate them:
- Exclusively online
- At will
- Without taking any further steps that obstruct or delay their ability to terminate their subscription
Businesses are allowed to require consumers to enter account information or authentication when terminating their subscription online.
It’s also outlined in the new law that companies must adequately notify customers of a few things, including:
- The automatic renewal or continuous subscription service will take place unless the customer cancels
- Any additional terms and conditions of the renewal period
- One or more ways consumers can cancel their subscription
- A link that directs customers to the cancellation process online
- Contact information for the business offering the subscription service(s)
Finally, there are two final notice timing requirements businesses must comply with, including:
- 3- to 21-day notice: If a customer accepts a free gift or trial that lasts longer than 31 days, the business must provide notice of expiration at least 3 days before and at most 21 days before the period ends.
- 15- to 45-day notice: If the subscription service term is 1 year or longer, businesses have to notify customers of the renewal at least 15 days before and not more than 45 days before the service is expected to renew.
The purpose of ARLs
The main goal of these requirements for businesses is to protect California consumers from paying extra subscription fees without receiving ample notice to cancel their subscription.
Consumers can also protect themselves by using a subscription service manager on their smartphone, which tracks monthly subscriptions and outlines details, such as renewal dates, automatic renewals, and expiration dates.
There are a few other states in the U.S. with similar ARL laws, including New York, Colorado, Delaware, Wisconsin, and Illinois.
Two of these states – New York and Wisconsin – also set forth ARLs for business-to-business (B2B) contracts that include subscriptions.
Managing subscription services in the digital age
While signing up for a streaming service can make it easy and convenient for customers, it can become a nightmare when they try to cancel their subscriptions.
Some services make their customers jump through hoops to cancel their subscriptions, while others make it simple and efficient.
Ultimately, businesses such as streaming services and app companies must comply with the new California law to avoid penalties. An ARL is a great way for states to protect their citizens from being misled into paying for an unwanted or auto-renewing subscription.
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