The latest targets of predatory lawyers in California are companies who market goods in California through subscription-based services that allegedly fail to comply with the technical requirements of the California Automatic Renewal Law. (B&P Code, §§ 17600, et seq.) If you find yourself on the receiving end of a demand letter seeking to extract a five-figure settlement under the threat of a class action on behalf of all of your California customers, it may be too late.
The California Automatic Renewal Law requires any automatic renewal offer to a consumer to comply with various content and style requirements. Any goods sent to a California customer under a continuous service agreement in violation of the statute may be deemed for all purposes to be “an unconditional gift to the consumer.” (B&P Code, § 17603.) Accordingly, you could be forced to refund to each of your California customers all the revenues collected from them regardless of whether or not any consumer was deceived or did not understand the terms of the automatic renewal.
Under the Automatic Renewal Law, an automatic renewal offer in California must:
disclose the following in the automatic renewal offer:
that the subscription or purchasing agreement will continue until the consumer cancels;
the description of the cancellation policy that applies to the offer;
the recurring charges that will be charged to the consumer’s credit or debit card, and that the amount of the charge may change, if that is the case, and the amount to which the charge will change, if known;
the length of the automatic renewal term or that the service is continuous, unless the length of the term is chosen by the consumer; and
the minimum purchase obligation, if any.
present the automatic renewal offer terms in a clear and conspicuous manner—in larger type than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same size, or set off from the surrounding text of the same size by symbols or other marks, in a manner that clearly calls attention to the language—before the subscription agreement is fulfilled and in visual proximity to the request for consent to the offer;
obtain the consumer’s affirmative consent to the agreement containing the automatic renewal offer terms before charging the consumer’s credit or debit card;
provide an acknowledgment that includes the automatic renewal offer terms, cancellation policy, and information regarding how to cancel in a manner that is capable of being retained by the consumer, which may be fulfilled after completion of the initial order; and
provide a toll-free telephone number, electronic mail address, a postal address only when the seller directly bills the consumer, or another cost-effective, timely, and easy-to-use mechanism for cancellation that shall be described in the acknowledgment.
The requirements of the Automatic Renewal Law are complex, and the stakes are high for an alleged violation. An attorney with experience in statutory compliance can be a helpful resource to ensure that the automatic renewal offer on your website is not creating an unconditional gift to your California subscribers.