California consumer attorneys are targeting companies who market goods in California through subscription-based services that fail to comply with the technical requirements of the California Automatic Renewal Law. (B&P Code, §§ 17600, et seq.) If your renewal process does not comply with the law, you may find yourself on the receiving end of a demand letter for a large settlement under the threat of a class action on behalf of all of your California customers.

The California Automatic Renewal Law requires any automatic renewal offer to a consumer to comply with certain content and style requirements. Any goods sent to a California consumer under a continuous service agreement in violation of the statute may be deemed for all purposes to be “an unconditional gift to the consumer.” (B&P Code, § 17603.) Thus, noncompliance with the technical requirements of the law may require you to refund to each of your California customers all the revenues collected from them regardless of whether any consumer was deceived or did not understand the terms of the automatic renewal.

Under the Automatic Renewal Law, an automatic renewal offer in California must disclose:

• that the subscription or purchasing agreement will continue until the consumer cancels;
• the description of the cancellation policy that applies to the offer;
• the recurring charges that will be charged to the consumer’s credit or debit card, and that the amount of the charge may change, if that is the case, and the amount to which the charge will change, if known;
• the length of the automatic renewal term or that the service is continuous unless the length of the term is chosen by the consumer; and the minimum purchase obligation, if any.

The automatic renewal offer terms must be presented in a clear and conspicuous manner—in larger type than the surrounding text, or 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—before the subscription agreement is fulfilled and in visual proximity to the request for consent to the offer.

You must obtain the consumer’s affirmative consent to the agreement containing the automatic renewal offer terms before charging the consumer’s credit or debit card. You must also provide an acknowledgment that includes the automatic renewal offer terms, cancellation policy, and information regarding how to cancel in a manner that is capable of being retained by the consumer, which may be fulfilled after completion of the initial order.

Finally, the subscription service provider must provide a toll-free telephone number, electronic mail address, a postal address only when the seller directly bills the consumer, or another cost-effective, timely, and easy-to-use mechanism for cancellation that shall be described in the acknowledgment.

The Automatic Renewal Law is complex. If you run a subscription service that automatically renews that is available in California you should seek legal counsel to ensure that the automatic renewal offer is not creating an unconditional gift to your California subscribers.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.