New York Governor Hochul has signed into law two significant pieces of legislation aimed at enhancing consumer protection in subscription-based products and services and credit card surcharge transparency. The laws are set to provide clearer guidelines and prevent customers from falling into unwanted subscription renewals and surcharge fees.
Details of the New Subscription Auto-Renewal Law
The amendment to Section 527-a of the general business law (S.5941B/A.3245D), effective immediately, stipulates that businesses offering automatic renewals for periods of one year or longer must notify consumers 15-45 days before the renewal deadline. This notification should include clear instructions for cancellation. However, entities regulated by the Public Service Commission, Federal Communications Commission, and certain financial institutions, among others, are exempt from these requirements. Violations of these provisions could result in fines up to $500 for a single incident and $1,000 for multiple incidents from a single act.
Credit Card Surcharge Pricing Regulation
Effective February 11, 2024, Section 518 of the general business law (S.1048A/A.2672B) mandates that merchants imposing a credit card surcharge must clearly display the total price inclusive of the surcharge. The surcharge cannot exceed the cost to the merchant for processing the transaction, and merchants must also display a cash price if offering a discount for cash payments. Violations can incur civil penalties of up to $500 per incident.
What Subscription Businesses Need to Do
To adhere to these regulations, businesses must:
- Set up systems to notify customers of automatic renewals within the specified timeframe.
- Clearly and conspicuously display total prices inclusive of credit card surcharges.
- Ensure surcharges do not exceed the actual cost of credit card processing.
- Keep abreast of any regulatory updates and exemptions that may apply to their operations.
Potential Fines and Enforcement
Businesses that fail to comply may face civil penalties ranging from $500 to $1,000 per violation, with enforcement by the attorney general and potentially other municipal consumer affairs offices.
INSIDER TAKE
The new laws reflect an increasing trend towards consumer protection and transparency in digital marketplaces. Given other regulations, most subscription businesses should be providing renewal notifications at this point anyway. Nonetheless, the crackdown on “dark patterns” and unfair practices by entities like the FTC and CFPB, and States like New York, indicates a continued move towards holding companies accountable for clear and fair consumer practices. As e-commerce and subscription services continue to grow, we expect further regulations to protect consumers and ensure fair trade practices.
