Automatically renewing subscriptions continue to be a major area of focus for state legislatures. As many states’ legislative sessions come to a close, it is important to be aware of the significant developments in the legal landscape for subscription businesses. Due to this expanding state law patchwork, steady flow of class action complaints alleging deficiencies in defendants’ auto-renewal practices, proposals and enforcements from the FTC, and tangle of evolving credit card rules, companies should regularly assess their practices with respect to point-of-sale disclosures, email confirmations, renewal notices, and cancellation processes.
Here are some of the most notable auto-renewal developments from the 2023 state legislative session:
- Cancellation continues to be an area of particular focus.
- Connecticut enacted H.B. 5314 (taking effect on October 1, 2023), which supplements the state’s existing auto-renewal law. Among numerous other obligations (some of which are unique), the new law imposes strict online cancellation obligations – akin to those required by California’s auto-renewal law – which requires providing a “prominently displayed direct link or button” or email message from the business that the consumer can reply to cancel. The law also restricts obstructing or delaying a consumer’s efforts to cancel.
- Adding to the existing slate of laws with similar requirements, several states now require businesses to send renewal notices for subscriptions with longer trial periods (e.g., Connecticut’s revised law, which requires notice if the trial period lasts at least 32 days; Virginia’s H.B. 1517, which requires notice “within 30 days of the end of the trial period” if the free trial lasts more than 30 days).
- The Virginia legislature also passed S.B. 1540, which amended the state’s existing auto-renewal law as of July 2023. The practical impact of the amendment – which narrows the definition of “automatic renewal” to subscriptions where the renewal term is more than one month – is subject to disagreement.
- With S.B. 30 (codified at Ky. Stat. § 365.400 et. seq.), Kentucky enacted its first auto-renewal law, which will take effect on January 1, 2024. The law lays out a comprehensive auto-renewal scheme requiring (i). point of sale disclosures, (ii) an acknowledgment to consumers after they enroll; (iii) easy, online cancellation if the consumer enrolled online; and (iv) notices to consumers in advance of material changes to subscription terms.
- The Illinois legislature enacted S.B. 328 (amending the state’s existing auto-renewal law), which like many other auto-renewal statutes, requires businesses to provide subscribers with an acknowledgement that includes “information regarding how to cancel.” But, unlike typical auto-renewal statutes, the provision adds the following: “… which may be accomplished by linking to a resource that provides instructions that account for different platforms and services, in a manner that is capable of being retained by the consumer.”
- Several newly passed laws mandate sending renewal notices to subscriptions with terms longer than one month, adding to the existing patchwork of states with similar requirements. Any businesses that do not currently send such renewal notices to all subscribers should assess and update their practices to reflect these new requirements.