A flurry of legislative activity surrounds negative option plans. Despite current and unprecedented congressional distraction, a bill was introduced in the House titled the “Unsubscribe Act of 2017.” This bill focuses on negative option contracts offered on the internet and includes a number of potentially problematic requirements:
- If a consumer has signed up for a negative option plan on the internet the consumer must be provided with an unsubscribe mechanism via the internet.
- With a free trial or introductory offer that automatically converts to recurring pay periods, the consumer must take an additional affirmative action indicating consent to be charged the amount of the first charge or any charge that has been increased prior to the seller processing the charge.
- For any auto renewal contract that is longer than 3 months, sellers must send a renewal notice not later than 30 days before the end of the term and on a quarterly basis thereafter. For quarterly terms, the consumer would have to be provided quarterly with prior notification. These notices must reiterate the material terms of the contract including information regarding how to cancel.
States legislatures such as California, Kansas, Maine, Massachusetts, Vermont and Alabama have also been busy in this area. A few examples include:
- California: In addition to other provisions, consumers would have to provide explicit authorization for the auto renewal feature of a free to pay conversion offer, which would be a separate consent from the agreement to accept the free trial. The bill also requires that a notice be sent at least 3 days before the first charge is made.
- Kansas: A consumer must affirmatively agree to each and every charge by email or text. The legislative intent behind this bill indicates a desire to prohibit negative option sales over the internet.
- Alabama: The automatic renewal provisions must be disclosed clearly and conspicuously in no less than 14-point bold type.0
- Other states: Bills require online cancellation, additional notices and/or affirmative opt-ins.
It is important to note that recent state enforcement action settlements have included some of the proposed legislation above and appears to support a continuing negative trend (if you will forgive the pun) for sellers. And as I have previously reported, auto-renewal provisions have been the subject of several lawsuits against companies like Blue Apron, Birchbox, Tinder, Lifelock, Hulu, Dropbox, Spotify, and AAA.
I will continue to keep you updated on relevant developments. In the meantime, be sure to manage your recurring billing programs carefully and at a minimum continue to comply with federal and state laws.
