Source: "What To Know About Latest Calif. Auto-Renewal Law Update" by Gonzalo Mon and Beth Chun, Law360 (September 27, 2024)
To listen to a 10 Minute Podcast generated by Google ‘NotebookLM’ on the subject, click here.
Summary: The following outlines the key changes introduced by California's Assembly Bill 2863 (AB 2863), amending the state's existing automatic renewal law. The updated law, effective July 1, 2025, significantly impacts businesses offering subscription-based services or products, including free trials, with a focus on enhancing consumer protection.
Key Themes & Provisions:
Expanded Scope & Misrepresentation:
The law now explicitly covers free-to-pay conversions (free trials).
Prohibits misrepresenting "any material fact" related to the transaction, including the existence of automatic renewals or continuous service.
Quote: "California regulators would likely take the position that such misrepresentations are already prohibited by existing laws that cover unfair or deceptive acts or practices, but this addition will now provide them with another tool to challenge these practices."
Express Affirmative Consent & Dark Patterns:
Requires businesses to obtain "express affirmative consent" to automatic renewal terms, including disclosures about cancellation policy, recurring charges, term length, and minimum purchase obligations.
Bans the use of "dark patterns" that hinder consumers from providing informed consent.
Quote: "The new law prohibits companies from including 'any information in the contract that interferes with, detracts from, contradicts, or otherwise undermines the ability of consumers to provide their affirmative consent to the automatic renewal or continuous service.'"
Mandates businesses to keep verification records of consumer consent for at least three years.
Simplified Cancellation Process:
Introduces the "click to cancel" requirement, enabling cancellation through the same method used for sign-up.
Prohibits any obstruction or delay in cancellation requests, mandating prompt responses to phone and voicemail cancellations.
Sets clear parameters for presenting alternate offers during cancellation, requiring a clear and conspicuous option to proceed with cancellation.
Quote: "On the phone, although a business may present consumers with alternate offers, a customer service representative must 'first clearly and conspicuously [inform] the consumer that they may complete the cancellation process at any time by stating that they want to 'cancel' or words to that effect.'"
Enhanced Notice Requirements:
Requires clear and conspicuous notice of fee changes, delivered in a retainable format (no in-app notices) between 7 and 30 days before the change takes effect.
Mandates annual renewal reminders detailing the product/service, charges, and cancellation methods, sent through the same medium used for activation or customer interaction.
Implications for Businesses:
Compliance Review: Immediate review of existing sign-up processes, marketing materials, cancellation procedures, and customer service protocols.
Updated Systems & Processes: Implement systems for obtaining and recording express affirmative consent, facilitating easy cancellations, and sending required notices.
Training & Monitoring: Train customer service representatives on the new law and monitor compliance with its provisions.
Proactive Adaptation: Consider adopting these consumer-friendly practices for consumers outside of California, anticipating potential nationwide adoption of similar regulations.
Conclusion: AB 2863 raises the bar for businesses operating in California's subscription-based economy. By prioritizing clear disclosures, easy cancellations, and ethical design practices, businesses can ensure compliance while fostering greater trust and transparency with their consumers.
California Automatic Renewal Law FAQ
1. What is the main purpose of the updated California Automatic Renewal Law?
This update strengthens consumer protections regarding automatically renewing subscriptions and services, especially given the rise of free trials converting to paid subscriptions. It aims to increase transparency and make cancellation clearer and easier for consumers.
2. How does this updated law affect free trials?
Previously, the law mainly covered paid subscriptions that auto-renewed. Now, it includes "free-to-pay conversions" (free trials). Companies offering these trials must now follow the same rules for clear disclosures, affirmative consent, and easy cancellation as those with paid auto-renewals.
3. What is "express affirmative consent" and why is it important?
"Express affirmative consent" means consumers must directly and clearly agree to the auto-renewal terms. This means going beyond pre-checked boxes. The update stresses this consent, requiring businesses to prove they obtained it and banning tactics that make it hard for consumers to understand or provide this consent.
4. How does the law prevent companies from using "dark patterns" during signup?
"Dark patterns" are design choices that manipulate users into unwanted actions. The law now explicitly forbids including any information during signup that contradicts, distracts from, or weakens the consumer's ability to give that knowing consent to auto-renewal.
5. What are the new requirements regarding cancellation methods?
The law stresses making cancellation simple. Companies must now generally allow cancellation through the same method used for signup (e.g., website, app, phone). Obstructing cancellation or failing to respond to requests promptly (including voicemails) is prohibited.
6. Can companies still present offers to consumers who are trying to cancel?
Yes, but with restrictions. Online, a clear "click to cancel" button must be continuously visible, letting consumers bypass offers. On the phone, reps must clearly state the consumer can cancel at any time by saying "cancel," and immediately process the request when the consumer says so.
7. What are the new notification requirements for fee changes?
Companies must give a "clear and conspicuous" notice 7-30 days before any fee increase for an auto-renewing service. This notice must be provided in a way the consumer can retain (e.g., email), not just within an app.
8. When does the updated law take effect, and what should businesses do to prepare?
The law applies to contracts made or changed on or after July 1, 2025. Businesses should review their entire auto-renewal process, from signup to cancellation, ensuring clear disclosures, obtaining and recording express consent, facilitating easy cancellation, and training customer service representatives accordingly.
