Legal Insider: Post Summer Auto Renewal Reminders

Marc Roth, a partner with Cobalt Law, shares auto-renewal reminders for Subscription Insider members.

Mastercard

As previously reported, Mastercard extended the compliance deadline for its new subscription billing rules from this past March to September 22 (8 days from now!). And the new rules are now officially published here, at Section 5.4.1 on page 185.

While many of Mastercard’s requirements align with the federal ROSCA and various state auto renewal laws (e.g., clear and conspicuous disclosure of offer terms (including a free trial), sending an order confirmation and renewal notices, and providing an easy way to cancel), one new and novel requirement is proving to be very problematic for most merchants – the need to send a confirmation receipt following every successful charge, which must include instructions on how to cancel. Having worked with many clients on developing a compliance strategy for this requirement, it is clear that cancel rates will be impacted.

There are also timing discrepancies between the new rules and various state laws for free trials and renewal notices, though Mastercard has said that in the event of a conflict between its rules and local laws, local laws will govern.

For those of you who did not receive a variance (extension) from Mastercard to comply with the new rules, we hope you are ready for the September 22 deadline.

Colorado and Delaware

As you also may recall, Colorado and Delaware amended their auto renewal laws in 2021, with both going into effect January 1, 2022. Why am I bringing this up now you ask? Well, both of these laws now require a renewal notice to be sent to subscribers on plans that bill less frequently than annually upon reaching 12 months. Under the amended Colorado law, if a renewal term is less than 12 months, a notice must be sent 25-40 days before the contract renews beyond a continuous 12-month period. This means that a monthly, quarterly or semi-annually billed program, upon reaching 12 continuous months, requires a renewal notice with cancel instructions. As this notice requirement only applies to contracts entered into after the effective date of the amended law, subscriptions started in January 2022 will soon be nearing the 12-month mark, and will thus require a notice.

Similar to, but not exactly the same as Colorado, Delaware’s amended law also requires renewal notices to be sent for less-than-annually-billed plans, but notably, monthly plans are expressly excluded since the law only applies to contracts that renew for a specified period of more than one month. If applicable, a notice is required when the contract continues more than 12 months after the day of the initiation of the contract, as well as prior to each subsequent extension of the contract (e.g., quarterly or semi-annually). The notice must be sent between 60 and 30 days before the cancellation deadline of the renewal term.

Idaho

SB 1298, which was signed into law on March 23, 2022 and becomes effective January 1, 2023, has limited applicability (only agreements entered into online) and requirements, but requires two methods of cancellation (a first!). It applies to agreements entered into or renewed on and after the effective date.

Offer Terms. Requires clear and conspicuous (not defined) disclosure of the automatic subscription renewal terms and the methods the consumer may use to cancel the subscription.
Renewal Notice. Requires a notice where the subscription renews for a specified term of twelve (12) months or more. The notice must clearly and conspicuously disclose (i) the goods or services to be delivered, (ii) the price to be charged, (iii) that the goods or services will be provided unless the consumer cancels, and (iv) at least two methods of cancellation, including at least one that is at no cost to the consumer. The notice must be sent between 30 and 60 days in advance of the date of the delivery or provision of goods or services.
Cancellation. Must provide a free online method to cancel the subscription as well as the ability to cancel in the same manner the consumer used to subscribe (which I find somewhat ironic since the law only applies to online enrollments and since one cancel method is online and the other is the same manner by which they enrolled, they both point to an online cancel – amirite?). If a phone number is provided for the purposes of cancellation, the number must be toll-free and prominently displayed in the disclosure.

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Marc Roth

Marc Roth advises clients on legal issues involving advertising, marketing, promotions and privacy. He is a former Federal Trade Commission attorney and served as Chief Marketing Compliance Counsel for a Time Warner subsidiary. Marc regularly assists clients understand and navigate federal and state laws governing advertising and marketing, such as the FTC Act and state UDAAP laws. He advises on claim substantiation, warranties, subscription marketing, credit card processing rules, free trials, pricing claims, sweepstakes and contests, and coupon, gift card and rebate programs. He also advises brands and agencies on legal concerns and risks in developing advertisements, promotions and activations for cannabis and CBD companies. He is a frequent speaker and author on marketing, privacy and technology law. He is recognized by Chambers and Best Lawyers US as a leading lawyer in national advertising and transactional law.