In Europe, there have been several directives in the EU relating to consumer contracts, including the Unfair Contract Terms Directive, the Consumer Rights Directive and, more recently, the Digital Content Directive and the Sale of Goods Directive. However, in addition to these guidelines, Germany has passed the Fair Consumer Contracts Act, which provides for stricter regulations for automatic renewals in e-commerce. An important new practical requirement is the undo button, the design of which is subject to detailed requirements. Non-compliant companies are banned by both competitors and consumer protection associations. In addition, consumers can terminate contracts at any time if the company does not comply. Some of the provisions of the Fair Consumer Contracts Act came into force on October 1, 2021, but the implementation of the cancellation button comes into effect on October 1, 2021. July 2022 mandatory, the same effective date as the updated ARL in California. The existing ARL in California requires companies that do an automatic renewal or ongoing service offering to present the essential terms of the offer to the consumer in a «clear and visible manner.» This includes appearing in a larger or contrasting font, font, or color, or being separated from the surrounding text in a way that draws attention to the language. Many laws regulate predatory termination processes that are intentionally opaque to make it harder for a consumer to opt out of a subscription. This includes processes where customers show up in person, have to wait endlessly on the phone to talk to someone, or pay for extra months or years before they can terminate a contract.
Colorado law, for example, requires cancellation mechanisms to be «readily available» and for companies that break the law to refund overpaid subscription fees. New York Attorney General Letitia James has emphasized that automatic renewals are a law enforcement priority, issuing a consumer warning in November 2021 reminding consumers and businesses that New York has updated its LR for business-to-business contracts. National Consumer League Executive Director Sally Greenberg has compiled a list of best practices for subscription models. Automatic renewal with subscriptions of one year or more must be completed 15 to 45 days before renewal under certain conditions. §17602(b)(2). Subscriptions can be convenient for consumers, and they are a great way to maximize revenue for companies that offer products and services over the long term, but there are risks that businesses need to be aware of that are specific to their subscription model and the consumers affected by it. At least 20 states have laws that regulate predatory subscription models. Is federal regulation underway? Rita Cohen, senior vice president of legislative and regulatory policy for the magazine group, said the organization has made proposals in California and testified in Colorado. One of the group`s concerns was the timing and duration of communications that would be required to cancel subscriptions. Laws that regulate subscription models should also require companies to provide customers with a full refund with an additional penalty if they don`t comply with the law. She stopped taking the program after about six months. But like millions of others, she forgot to terminate after the original contract ended, and Noom automatically extended it for eight months, at a total cost of $179.
Violations of automatic renewal laws are usually corrected by government enforcement actions. However, in recent years, there have been a number of major class action lawsuits alleging illegal auto-renewal programs in newspaper and magazine subscription programs. Recently, a lawsuit for alleged violations of the state`s consumer protection laws, as well as California`s ARL, which is based on a welfare company`s misleading testing timelines and consumers` struggles with cancellation and refunds, was settled for more than $50 million. Although this class action lawsuit alleged a violation of california`s ARL, several courts have concluded that there is no independent private right of action in california`s ARL. See Johnson v. Pluralsight, LLC, 728 F. App`x 674, 676 (Cir. 9, 2018); Lopez v YP Holdings, LLC, 2019 WL 7905748, *4 (C.D. Cal. January 23, 2019); Mayron v Google LLC, No. H044592, 2020 WL 5494245 (Cal.
Ct. App. September 11, 2020). Private litigants may seek automatic renewal lawsuits under various consumer protection laws, such as California`s Unfair Competition Act. See Morrell v. WW Int`l, Inc., 551 F. Supp.3d 173, 182 (2nd Cir. 2021). National Consumers League Executive Director Sally Greenberg has compiled a list of best practices for subscription models based on her work in favor of stricter regulations. She said a good subscription model gives customers full disclosure of terms when they sign up, notifies customers in advance of whenever they are charged, explains price increases, and lists cancellation procedures in a clear and eye-catching font where they will definitely see them.
Lawmakers, regulators, and law enforcement agencies in the U.S. and Germany increased pressure on subscription plans last year by updating their Automatic Renewal Act (ARL). California and Germany have new ARL requirements as of July 1, 2022. Typically, an auto-renewal or negative option is a paid subscription plan that automatically renews at the end of the period for a later period until the subscribed consumer cancels.