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. 

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Photo of Timothy A. Butler Timothy A. Butler

Tim Butler helps companies thrive by developing tailored strategies to address their regulatory compliance challenges and vigorously defending them in government enforcement actions and bet-the-company lawsuits.

A former prosecuting attorney for the Federal Trade Commission (FTC) and former senior official in the Georgia

Tim Butler helps companies thrive by developing tailored strategies to address their regulatory compliance challenges and vigorously defending them in government enforcement actions and bet-the-company lawsuits.

A former prosecuting attorney for the Federal Trade Commission (FTC) and former senior official in the Georgia Attorney General’s Office, Tim has led the defense of dozens of government investigations and enforcement actions brought by the FTC, the Consumer Financial Protection Bureau (CFPB), and the various state attorneys general. Tim also regularly defends clients in bet-the-company lawsuits, including complex business disputes and consumer class actions alleging privacy, false advertising, and unfair or deceptive business practice claims.

Tim is an experienced guide for companies struggling with regulatory complexity. He offers clear advice that helps his clients meet the demands of the ever-growing set of laws and regulations governing data privacy and cybersecurity, advertising and marketing practices, and consumer financial products and services. Clients rely on Tim’s business-minded and practical strategies to address their most difficult regulatory compliance challenges.

A graduate of the University of Chicago and Stanford Law School, Tim is a prolific author and regularly speaks to industry and trade groups about the evolving privacy landscape, about cutting-edge issues affecting payments and fintech companies, and about developments at the FTC, the CFPB, and within the state attorneys general community.

Photo of Matthew White Matthew White

Matt White guides clients through regulatory compliance challenges and represents clients in regulatory and civil investigations and litigation.

Matt has counseled fintech and payment companies on regulatory compliance matters, including those involving the Electronic Fund Transfer Act, the Fair Credit Reporting Act, the…

Matt White guides clients through regulatory compliance challenges and represents clients in regulatory and civil investigations and litigation.

Matt has counseled fintech and payment companies on regulatory compliance matters, including those involving the Electronic Fund Transfer Act, the Fair Credit Reporting Act, the Gramm-Leach-Bliley Act, the Truth in Lending Act, and their respective implementing regulations (Regulations E, V, P, and Z). Adept with the Consumer Financial Protection Bureau’s (CFPB) Prepaid Rule, Matt has provided guidance regarding prepaid cards and related compliance.

Matt has also aided clients in developing regulatory compliant products and functionalities, including an earned wage access program, reimbursement prepaid card programs, new merchant cash advance products, and tokenized payment capabilities. In connection with products on which Matt advises, he has also negotiated high-stakes technology sales agreements involving complex regulatory issues, including compliance with data privacy laws, financial regulations, and card network rules.

Beyond helping clients strategize for regulatory complexity, Matt also helps clients navigate government investigations and enforcement actions brought by the Federal Trade Commission (FTC), CFPB, and state attorneys general.

Photo of Tessa Cierny Tessa Cierny

Tessa Cierny advises companies on financial technology and data privacy issues. She has experience counseling companies on state and federal regulatory compliance, including existing and emerging privacy laws, such as the E.U.’s General Data Protection Regulation (GDPR) and the California Consumer Privacy Act

Tessa Cierny advises companies on financial technology and data privacy issues. She has experience counseling companies on state and federal regulatory compliance, including existing and emerging privacy laws, such as the E.U.’s General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA), as well as financial and banking regulations, such as the CFPB’s Section 1071 Small Business Lending Rule (Regulation B). In addition, she assists clients in defending business disputes and data breach litigation.

Prior to joining Greenberg Traurig, she served as global records manager for WestRock, where she developed and implemented email and data retention policies for global data privacy regulation compliance. In this role, she also advised on data privacy concerns related to data retention, data loss prevention, and data governance.

Photo of Zeba Pirani Zeba Pirani

Zeba Pirani is a Resident Attorney based in Greenberg Traurig’s Atlanta office.