By law, businesses must also seek and obtain consumer consent to offer terms in the vicinity of these essential disclosures and prior to the time of billing to the consumer. For auto-renewal programs, this information should include: Now that you know the answer – yes – to the question «Are auto-renewal contracts legal?», you may be ready to take advantage of some of the many competitive advantages these contracts can offer your business. With auto-renewal contracts, you can better retain customers and make more accurate predictions about future revenue. Auto-renewal laws are also evolving and can have a significant impact on businesses that offer auto-renewal subscriptions to their customers. Many states have expanded the scope of these laws or are considering expanding the scope of these laws, and the Federal Trade Commission is also involved in protecting consumers and ensuring they have all the relevant information before they click the «Buy Now» button. Automatic renewal contracts are terminated depending on the specific language of the contractual provision. This usually requires notification to the supplier that you want to cancel the contract in the future. Most regulations require that this notice be given within a certain period of time after the renewal date. Over the past year, New York has expanded its business-to-consumer ARL to include additional consent, disclosure and cancellation requirements.
In addition to this updated business-to-consumer ARLC, the original New York ARL covers business-to-business contracts «for maintenance, maintenance or repair or for real estate or personal property» when the renewal period is longer than one month. New York`s expanded ARL, which went into effect in 2021, has notable new requirements for businesses that we`ve seen in other state consumer protection laws, including omnibus privacy laws: Obtain «affirmative consent» to terms, including opt-out terms (which are clearly disclosed in «visual» or «temporal» proximity to the consent mechanism) before giving an automatic consumer Renewal. If this consent is not obtained, the «goods, goods, goods or products» are considered as «unconditional gifts to the consumer who can dispose of the [gift] in the manner he deems appropriate, without the consumer having any obligation to the company» § 527-a (6). The FTC also claimed that despite the promise of «easy cancellation,» ABCmouse does not provide an easy way to stop automatic renewals. The FTC complaint alleges that consumers who attempted to cancel by phone, email, or by submitting a customer service form had to negotiate a lengthy and confusing process that often prevented consumers from completing cancellations. In October 2021, the FTC issued an enforcement policy statement in which it «warns companies against using illegal dark models that attract or trap consumers in subscription services.» The Application Policy states that sellers must obtain clear consumer consent for automatic renewal. You can read our other cover of dark patterns here. When using auto-renewal contracts, it`s important to know how to renew or cancel a contract. Your business can use auto-renewal agreements both ways. You can use them with your customers to build loyalty and reduce costs. You can also use them for software or services you need from other providers. In New York, businesses seeking to enforce an auto-renewal clause in a «contract for service, maintenance, or repair of real property or personal property» must, among other things, provide written notice of automatic renewal, delivered in person or by registered mail, between fifteen and thirty days before the notice period expires.
Court interpretations of the types of contracts falling within the scope of New York law have tended to become more expansionary over time. But the fact that the contract must be for «the maintenance, maintenance or repair of real or personal property» limits the scope of New York`s restrictions on auto-renewal provisions compared to those of California and Oregon. Incorrect notification may result in the automatic renewal of a new contract term. The duration of this period depends on the language of the contract. Some contracts may impose other termination requirements, such as: automatic renewal provisions that do not meet these notification requirements would be invalid and unenforceable, and AB 2462 would require sellers to refund the consumer for the unearned portion of the automatically renewed service contract in such circumstances. If an error has caused the seller not to comply with AB 2462, any unvested part of the contract that is automatically renewed must be refunded from the date on which the seller is informed of the error. Violations of AB 2462 would also constitute an illegal practice under the State Consumer Fraud Act. Earlier this year, the FTC fined online learning company ABCmouse $10 million for violating ROSCA. According to the FTC, from 2015 to at least 2018, the company did not clearly disclose that memberships would automatically renew, charge consumers` credit cards without explicit permission, and make it harder for consumers to stop recurring charges. Legal requirements for auto-renewal contracts vary from state to state, so it`s always important that your company`s legal department creates a compliant agreement. Please fill out our short form to receive weekly updates from Scarinci Hollenbeck lawyers on the latest legal topics.