This will be the last report of the year unless something major happens in the auto renewal space before the holiday break. We hope you’ve been finding these reports helpful in navigating the laws and credit card rules impacting subscription marketing. Today we’ll cover four quick items, including reminders of three new state laws coming into effect January 1, 2022 and a wacky new auto renewal bill courtesy of our friends in Congress.
Colorado
As previously reported, Colorado amended its service contract law in July to impose several new obligations on negative option and subscription marketers (as well as dating apps/sites, which are not covered here). The changes are effective January 1, 2022.
· Terms. Disclose enrollment terms clearly and conspicuously, including the price to be charged after a free trial.
· Acknowledgement. Send an order acknowledgment with information on how to cancel.
· Cancel Method. Provide a “simple, cost-effective, timely, easy-to-use, and readily accessible cancel method,” which may be satisfied by either (i) a one-step link that is: (A) located on the seller’s website or contained in a device or service or an electronic communication to the consumer, or (B) available immediately or after the consumer authenticates their identity as authorized to make a change to the account; or (ii) an in person mechanism.
· Notice of Material Change. Send notice of material change to the terms and how to cancel.
· Renewal Notices. To be sent 25-40 days prior to the contract renewal with information on how to cancel. For contracts that renew less than 12 months (e.g., monthly, quarterly, semi-annually), the notice must be sent before the contract renews beyond a continuous 12-month period (e.g., sometime in the 11th month).
Delaware
Delaware amended its existing service contracts law in August to, among other things, impose a similar renewal notice requirement as Colorado, and require an online method to cancel for consumers who enrolled online. The changes are effective January 1, 2022.
· Terms. Disclose enrollment terms clearly and conspicuously (same definition as California).
· Renewal Notice. For contracts that renew for a specified period of more than 1 month, when the renewal causes the contract to be in effect more than 12 months after the day of the initiation of the contract, a notice must be sent between 30 and 60 days prior to each upcoming extension of the contract. With the exception of monthly renewing subscriptions, this amendment mirrors Colorado in that renewal notices are required for any contract term upon reaching 12 months.
· Cancellation. Must provide a cost-effective, timely, and easy to use mechanism for cancellation, which includes an online method for consumers who enrolled online. This cancellation obligation applies to any renewal contract, regardless of term length.
Illinois
Illinois amended its automatic contract renewal law, like Delaware, to require sellers who allow consumers to accept an automatic renewal or continuous service offer online to be allowed to terminate exclusively online, which may include a termination email formatted and provided by the seller that a consumer can send to the seller without additional information. The changes are effective January 1, 2022.
U.S. Congress
On December 1, Senator Chris Van Hollen (D-MD) introduced an insane piece of legislation called the Consumer Online Payment Transparency and Integrity Act (S. 3298). This bill mirrors to some extent the Unsubscribe Act that was introduced in the House and Senate in June (HB 3953 and SB 2072), but goes way further. Read below for the craziness. While not likely to pass as introduced, it will be interesting to see how this bill plays out against the Unsubscribe Act, as well as the FTC’s ongoing (and seemingly never ending) review of the Negative Option Rule (16 CFR 425).
· Enrollment Terms. Would require clear and conspicuous disclosure of a free-to-pay conversion, negative option, or any other automatic renewal offer terms, including the cancellation procedure.
· Renewal Notices. Would require sellers to notify consumers of the first and all subsequent renewals no less than 7 days prior to the renewal (or longer as may be determined by the FTC), in the same manner in which the consumer enrolled. The notice must inform consumers how they may cancel, which includes an online mechanism and a toll-free number, email address, postal mail address, or other cost-effective, timely and easy-to-use mechanism.
· Annual Affirmative Consent to Continue. Attention passengers, please buckle your seatbelts. Sellers would be required to “on an annual basis and notwithstanding a consumer’s consent to the initial term (or any subsequent term), obtain the consumer’s express informed consent to renew the contract before charging the consumer for the renewal.” Exact words, verbatim, from the bill.
· Notice and Affirmative Consent to Continue Following 6 months of Non-Use. Passengers, please check those seatbelts! Would require a seller with actual knowledge that a consumer has not used a good or service subject to the renewal contract in the 6-month period following the consumer’s most recent consent to (i) obtain the consumer’s express informed consent to the renewal before charging for the automatic renewal, and (ii) inform the consumer of her right to terminate the contract and receive a prorated refund for the remaining portion of the contract. Note: This mirrors a requirement included in an early version of the Colorado amendment but was removed following industry input.
· Free to Pay Conversions. Sellers would be required to notify consumers no less than 7 days prior to the end of the free trial (or longer as may be determined by the FTC), in the same manner in which the trial offer was accepted, how they may cancel before being charged. While this requirement may be reasonable and in-line with some state free trial laws, here’s the kicker: “notwithstanding a consumer’s consent to the free trial, obtain the consumer’s express informed consent to the renewal not less than 7 days (or longer as may be determined by the FTC) before the expiration of the trial period and before charging the consumer for the automatic renewal.” Again, exact words, verbatim, from the bill.
· Prohibit Use of Dark Patterns. Would prohibit using “Dark Patterns” to obtain a consumer’s express informed consent. Defines “Dark Patterns” as a “user interface that has the substantial effect of subverting or impairing user autonomy, decision making, or choice”). Unclear exactly what that means.
Thanks for reading and stay tuned for developments in the New Year!
