Automatic Subscription Renewal Programs

Consumers who have unwittingly entered into automatic renewal agreements may be eligible to file a lawsuit against companies that mislead their customers into such agreements. Various states have consumer protection laws prohibiting companies from automatically renewing subscriptions without obtaining the customer's express consent or by not adequately explaining the terms and conditions. Further, there are federal laws that protect consumers and give regulators the ability to go after companies that violate consumer trust.

Companies in a variety of sectors, including online services, delivery subscription services, and television and entertainment streaming, use automatic subscription renewal policies. Customers enroll and are then automatically charged periodically (monthly, for example) for continuous service. Companies that use automatic subscription renewal say the system benefits customers by being an easy and efficient way to continue services. But customers must be aware they are agreeing to an automatic renewal, and they must be made aware of the cancellation procedures.

State laws regarding automatic subscription renewal vary. Consumers in California are protected by the California Business and Professions Code, Section 17600, which states companies must disclose the automatic renewal terms in a clear and conspicuous manner before the agreement is completed, and that the terms must be in visual proximity to the consent for the agreement. In other words, the terms of the automatic renewal cannot be buried in the other terms and conditions on a different page of the website. Furthermore, companies cannot charge a customer's credit card, debit card or bank account on an ongoing basis without express consent.

In New York, S.B. 40 also states that customers must give their express consent before companies can charge for renewal services.

Federally, there are laws protecting consumer's rights. Under the Federal Trade Commission Act, 15 U.S.C. Section 41, companies must clearly disclose their automatic renewal policies. Congress' Restore Online Shoppers' Confidence Act gives the FTC and state attorneys general the ability to penalize companies who use negative option features (in which companies use a customer's silence as acceptance of a renewal) in their automatic renewal program. It also prohibits companies from turning a free trial into a paid subscription without getting the customer's consent.

In addition to concerns about automatic renewal services are concerns about free trials being turned into paid subscriptions without obtaining the customer's consent, without adequately explaining the cancellation process to the customer, or without providing proper time to cancel before the trial period expires.

Some companies, for example, are accused of offering products on a short trial period, but not telling customers they will be charged full price for the goods after the trial period expires or that they will be charged a restocking fee when they return goods. In some cases, customers say their goods do not even arrive within the trial period, so by the time their goods arrive, the free trial is already over and there is no time to cancel.

In December 2014, Sirius XM agreed to pay $3.8 million to various states to settle allegations about the company's automatic subscription renewal policies. In 2015, LIFELOCK reached a preliminary settlement in a lawsuit alleging it violated California Unfair Competition Law.

Also in 2015, a lawsuit was filed against Neopets, alleging unfair business practices for failing to warn about continuous renewals.

Customers who have unknowingly signed up for automatic renewal services or have been misled by the terms and conditions of an automatic renewal may be eligible to file a lawsuit against the company or companies involved.

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Last updated on Jan-15-16