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As I shared in my last blog post, Subscription and Automatic Renewal Laws: Pitfalls to Avoid, federal and state regulations require businesses to take certain actions when automatically renewing contracts and subscriptions. In this blog, I’ll provide more information about these laws and best practices to help you ensure your business complies. As a marketplace owner or operator, you likely have customers in many US states. Although there’s no one-size-fits-all solution, there are policies and procedures you can implement nationwide.
Subscription and renewal laws vary state by state, but there are some consistencies
First, it’s important to familiarize yourself with the different types of subscription and automatic renewal laws. While many states have laws on the books, not all laws apply to all types of subscriptions and automatically renewing contracts. Arkansas and Tennessee, for example, have laws that apply to home security contracts, Missouri's law applies to discount buying organizations (e.g. Costco), Montana's law applies to natural gas services, and Colorado, Iowa, Maryland, Nevada, New Hampshire, Pennsylvania, and South Carolina have laws that apply to health club services. So, for most marketplaces, these states’ laws won’t apply.
On the other hand, the following states have laws that may apply to your subscription or automatically renewing contracts, depending on the types of services or goods being transacted: California; Connecticut; District of Columbia; Florida; Georgia; Hawaii; Illinois; Louisiana; Maine; New Mexico; New York; North Carolina; North Dakota; Oregon; Utah; Vermont, Virginia; and Wisconsin.
Although no two subscription or automatic renewal laws are identical, most laws are triggered when the original contract term and the renewal term meet certain criteria. For example, if the original contract is 12 months or more and the renewal term is more than one month, you must comply with this law. Again, this is just one example, but it’s important to understand whether the law applies to your business based on the type of goods or services your business offers, the original contract term and the renewal term.
If the automatic renewal or subscription law applies, there are six methods to ensure compliance with such laws, including:
Affirmative consumer opt in
Clear and conspicuous disclosure of the automatic renewal terms
Automatic renewal terms in visual proximity to the purchase or checkout button
E-mail confirmation of the purchase that includes the automatic renewal terms
Notification of cancellation method, including phone, email, or other available options
Amount of time required for notification prior to the automatic renewal
States vary in their laws regarding how much time notifications must be provided prior to automatic renewals, from 15-30 days, 15-60 days, 30-60 days and 30-90 days. As you can see, a good rule of thumb is to provide 30 days notice prior to the automatic renewal and before charging your customer’s credit card.
Bottom Line
This blog aims to shed some light on subscription and automatic renewal laws that apply to many online and marketplace organizations. It's important to note that this isn’t intended to provide legal advice. You should consult a lawyer to ensure your business follows US local, state, and federal laws. For more detailed information on automatic renewal state laws, check out this handy reference guide published by Thomson Reuters Practical Law. Or, for a complimentary consultation with our experts at Marketplace Risk, please contact info@marketplacerisk.com.