On October 4, California Governor Gavin Newsom signed into law amendments to California’s existing law on automatic subscription renewals.  The law applies to all businesses that make automatic renewal or continuous services offers to California consumers.  The amendments are effective July 1, 2022.

The amendments include new notice requirements that apply:

  • when a consumer accepts a free gift or trial lasting more than 31 days that was included in an automatic renewal or continuous service offer or accepted an automatic renewal or continuous service offer at a promotional or discounted price that applies for more than 31 days.  In these situations, the notice must be provided at least 3 days before and at most 21 days before the expiration of the period for which the fee gift or trial, or promotional or discounted price, applies.
  • when the consumer accepts an automatic renewal or continuous service offer with an initial term of one year or longer that automatically continues unless the consumer cancels.  In those cases, the notice must be provided at least 15 days and not more than 45 days before the automatic renewal offer or continuous service offer renews.

An offer is exempt from the notice requirement if the consumer does not enter into the contract electronically, and the business has not collected or maintained the consumer’s email address, phone number, or other means of notifying the consumer electronically.  The amendments provide that a “free gift” does not include a free promotional item or gift given by the business that is different from the subscribed product.

The amendments specify the information that must be included in the notice.  Prior to the amendments, California law required businesses that allow consumers to accept an automatic renewal or continuous service offer online to also allow a consumer to terminate the service exclusively online.  The amendments provide that the consumer must be able to terminate the service online “without engaging in any further steps that obstruct or delay the consumer’s ability to terminate the automatic renewal or continuous service immediately.”  They also provide that the business must provide a termination method that is either online in the form of a prominently located direct link or button or an immediately accessible termination email that a consumer can send to the business without further information.

On October 19, 2021, from 2:00 p.m. to3:00 p.m. ET, Ballard Spahr will hold a webinar, “Pitfalls of Using Subscription Services in the Consumer Financial Services Industry.”   Click here for more information and to register.