Colorado and Delaware have enacted new laws for automatic renewal or negative options offers. The new laws became effective January 1, 2022. Illinois already has a law on the books related to automatic renewals but has recently made a few minor amendments to it.
Colorado. Companies must disclose the following in a clear and conspicuous manner before executing the contract:
- The contract will automatically renew or extend after the initial period for a set period of not more than one year unless the consumer gives express written consent for a longer renewal term;
- A description of the cancellation policy that applies to the offer;
- Any recurring charges made to the consumer’s card as part of the autorenewal contract;
- The length of the automatic renewal term; and
- The minimum purchase obligation, if any.
Moreover, if the offer includes a trial period, the offer also must include a clear and conspicuous explanation of the price that will be charged and any further purchase obligations that will be imposed on the consumer after the trial period ends.
In Colorado, “clear and conspicuous” means “in a larger type than the surrounding text; in contrasting type, font, or color to the surrounding text of the same size; or set off from the surrounding text of the same size by symbols or other marks in a manner that clearly calls attention to the language.”
If using a link to disclose autorenewal terms, the link must:
- Be available before the consumer elects to purchase the goods or services;
- Appear directly adjacent to any online link used by the consumer to purchase any good or service subject to the autorenewal; and
- Be labeled with, or directly adjacent to, a clear and conspicuous disclosure that states by purchasing the good or service, the consumer agrees to an automatic renewal.
The company also must provide the consumer a written acknowledgment that includes the automatic renewal terms, the cancellation policy, and information regarding how to cancel in a manner capable of being retained by the consumer. If the offer includes a trial period, a business must disclose how the consumer can cancel the contract before being required to pay for the services.
Businesses must provide a simple, cost-effective, timely, and easy-to-use mechanism for cancelling an automatic renewal. A one-step cancellation link located on your website or an in-person mechanism at a physical location where the consumer regularly utilizes any goods or services is deemed to be sufficient.
Colorado also requires notice 25 to 40 days prior to any automatic renewal.
Delaware. Delaware contains a broad requirement that a company disclose the terms of an automatic renewal contract clearly and conspicuously. Clearly and conspicuously means in a larger type than the surrounding text, or in a contrasting type, font, or color of the surrounding text, or set off from the surrounding text of the same size by symbols or other marks.
Businesses must notify a consumer between 30 to 60 days prior to the cancellation deadline, and such notice should clearly and conspicuously disclose:
- That unless the consumer cancels the contract, the contract will automatically renew;
- The date the contract will automatically renew if not cancelled;
- The date the consumer must cancel the contract to avoid automatic renewal;
- The procedures to cancel the contract; and
- How the consumer may obtain details of the automatic renewal contact (i.e., a phone number, address, a copy of the provision, or access to the contract).
Illinois. While Illinois already has an automatic renewal law, it is adding a provision regarding cancellations.
In the notice provided 30 to 60 days prior to an automatic renewal, any company that makes an automatic renewal offer online must provide a toll-free phone number, email, postal address, or other cost-effective, timely, and easy-to-use mechanism for cancellation. A consumer who accepts an automatic renewal offer online must be allowed to exclusively terminate online, which may include a termination email formatted and provided by the company that a consumer may send without additional information.
Our Take. As we previously discussed in a blog post, the FTC is scrutinizing companies that make subscription offers and intends to be vigilant in protecting consumers. Companies must be diligent in ensuring their practices comply with the various states that have enacted laws.