Go-To Guide:

• The California legislature has proposed amendments to California’s Automatic Renewal Law (ARL).
• If enacted in their present form, the legislature’s proposed amendments would introduce stricter mandates for disclosures, consent, and cancellation processes and further align California’s ARL with the Federal Trade Commission’s (FTC) proposed changes to its Negative Option Rule.
• The legislature’s proposed amendments—and federal and state actors’ continued focus on the potential consumer harms associated with automatic renewal offers—demonstrate again that businesses making automatic renewal, negative option, or continuous service offers should develop and maintain comprehensive compliance measures.

On April 1, 2024, California’s legislature introduced Assembly Bill 2863, which proposes amendments to California’s ARL. If enacted, the proposed amendments would introduce stricter mandates for disclosures, consent, and cancellation processes and further align California’s ARL with the FTC’s proposed changes to its Negative Option Rule.

Proposed Amendments

If enacted, the California legislature’s proposed amendments to California’s ARL would significantly impact both businesses and consumers.

• Broader scope. California’s ARL currently governs any “plan or arrangement” in which a paid subscription or purchasing agreement offered in the state of California automatically renews at the end of a definite term or continues until it is cancelled by the consumer. The legislature’s proposed amendments would broaden the scope of California’s ARL so that it also covers (1) any “provision of a contract” that creates an automatic renewal or continuous service offer and (2) any “free” subscription or purchasing agreement.
• Affirmative consent and recordkeeping. The legislature’s proposed amendments would require businesses to obtain a consumer’s affirmative consent to any automatic renewal or continuous service offer and to obtain that affirmative consent “separately from any other portion of the contract.” They would also require businesses to maintain “verification of the consumer’s affirmative consent for at least three years, or one year after the contract is terminated, whichever period is longer.”
• Dark patterns and misrepresentations. The legislature’s proposed amendments would prohibit businesses 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.” They would also broadly prohibit businesses from misrepresenting “any material fact related to the transaction” or “any material fact related to the underlying good or service.”
• Annual notices and increased-fee notices. The legislature’s proposed amendments would require businesses to send annual reminders “in the same medium” the consumer used in the transaction that activated the offer, with the annual reminders providing specific details regarding the relevant product or service, the frequency and amount of the charges associated with the relevant product or service, and the cancellation mechanism. In addition, they would require businesses to provide consumers with notices of fee increases “no less than 45 days before the fee increase takes effect.”
• Improved cancellation procedures and notice of fee increases. The legislature’s proposed amendments would require businesses to offer consumers the ability to cancel or terminate the product or service “in the same medium” the consumer used in the transaction that activated the offer. In addition, they would require businesses that provide for cancellation by a toll-free telephone number to answer calls “promptly” for no fewer than 12 hours between 6 a.m. and 10 p.m.
• Pre-billing notices. The legislature’s proposed amendments would require businesses to provide a consumer with notices containing detailed information, including the amount or range of costs and the frequency of charges, before obtaining the consumer’s billing information.

Takeaways

The California legislature’s proposed amendments to California’s ARL demonstrate, again, that federal and state actors are concerned about the potential consumer harms associated with automatic renewal, negative option, and continuous service offers. Businesses offering these sorts of offers should continue to carefully monitor relevant federal and state developments.

If enacted in their current form, the California legislature’s proposed amendments would apply to contracts “entered into, amended, or extended” on or after Jan. 1, 2025.