New Cancellation and Notice Requirements Under California's Automatic Renewal Law Take Effect in Three Months - Sidley Austin LLP

Now is the time to review your automatic billing practices and procedures to ensure compliance with California’s amended Automatic Renewal Law (ARL). On October 4, 2021, California Gov. Gavin Newsom signed into law Assembly Bill No. 390, which amends the ARL (California Business and Professions Code Section 17600 et seq.), to add stricter cancellation and notice requirements for subscription-based products and services. The updated law takes effect July 1, 2022, and may require businesses operating in California to update their websites, mobile apps, and customer service training to comply with the new cancellation and notice requirements.

The existing ARL (last updated in 2018) requires businesses to (1) clearly and conspicuously disclose certain automatic renewal offer terms at the point of sale; (2) obtain consumers’ affirmative consent to the automatic renewal terms; (3) provide a postpurchase acknowledgment that includes the automatic renewal terms and cancellation policy in a manner that the consumer can retain; (4) provide consumers with a readily accessible mechanism for canceling that is described in the postpurchase acknowledgment; (5) allow consumers who enter into an automatic renewal contract online to cancel the service exclusively online; and (6) notify consumers about any material changes to the automatic renewal terms and provide information regarding how to cancel before such changes take effect.

Beginning July 1, 2022, the amended ARL requires businesses to comply with the following additional requirements:

• Businesses will be required to send an additional notice to California subscribers explaining how to cancel 3 to 21 days before the expiration of a free trial or promotional price offer that lasts 31 days or more. The reminder notice must include the following: (a) that the service will renew automatically unless canceled; (b) the length and terms of the renewal period; (c) a method for the consumer to cancel the service; (d) if electronic, a link directing the consumer to the cancellation process (or other reasonably accessible means); and (e) contact information for the business.
• Businesses will be required to send a reminder notice including the same information outlined above to California subscribers 15 to 45 days before renewal of a subscription with an initial term of one year or longer that automatically renews for a subsequent term longer than one month. Notably, if a business otherwise would be subject to both notification requirements because it offers a promotional plan with an initial term of one year or longer, it must comply with only the requirement to deliver a reminder notice 15 to 45 days before the contract renewal date.
• Existing law requires businesses to provide an online cancellation method for California users who enter into an automatically renewing contract online. The amended law introduces an additional requirement that California users who sign up online be able to cancel their subscription immediately and at will (after account authentication) by either a prominently located link or button on the website or a preformatted termination email that the consumer can send without adding additional information.

Compliance with the new cancellation and notice provisions may require companies to update their platforms and policies. Businesses serving customers in California should review current practices to assess whether updates to policies, sign-up and cancellation flows, and customer communications will be necessary to ensure they are in full compliance when the new amendments take effect July 1, 2022.

Sidley Austin LLP provides this information as a service to clients and other friends for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship. Readers should not act upon this information without seeking advice from professional advisers.

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source: https://www.sidley.com/en/insights/newsupdates/2022/03/new-cancellation-and-notice-requirements-under-cas-automatic-renewal-law-take-effect-in-three-months

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