eHarmony has agreed to pay up to $2.2 million to resolve allegations brought by four California counties and the city of Santa Monica over the company’s advertising and billing practices. Specifically, the company agreed to comply with CA law that already requires that renewal terms are clearly and conspicuously disclosed upfront and which requires companies to obtain consumers’ informed consent prior to billing their card. However, in the settlement, the company has also agreed to obtain the consumers’ consent through “a separate check-box, signature, or other substantially similar mechanism” that relates solely to the automatic renewal terms and no other part of the transaction which is not currently required by statute. They are also now required to send an e-mail confirmation of the transaction immediately after the transaction.
In Aug. 2017, the same division in the City Attorney’s Office obtained a $3.6 million settlement with Beachbody over auto-renewals. The settlement also included a requirement to include a separate box that consumers must check to consent to an automatically renewing membership. This requirement has also been part of settlements for FTC enforcement actions regarding deceptive practices regarding auto-renewal terms.
Companies that sell products or services through subscription models need to keep in mind that there are numerous federal and state laws could impact how these models are structured and advertised. Failure to comply with these laws or properly respond to consumer complaints that find their way to the state consumer protection agencies could result in regulatory scrutiny. It is becoming more ubiquitous that regulatory settlements include the need for a second consent by means of a checkbox to the auto-renewal of those subscriptions.
Also, keep in mind that California’s auto-renewal law has been updated effective July 1 which includes stricter guidelines on free-trials that end with a paid subscription and requires companies to provide a way to cancel online, not just on the phone or by mail. This online cancellation mechanism is also required by Visa regulations effective in April of this year.
Insider Take
It might be time to revisit your auto-renewal policies and advertising to ensure you are not held to a higher standard than where your business is operating at. We recommend you work with a legal expert in auto-renew law and regulation. As a first step, you should ask your legal expert to conduct an audit of your auto-renew processes.
