In November, New York State enacted an extensive auto renewal law (ARL). Taking effect on February 9, 2021, New York’s ARL covers contracts that include an automatic renewal for a subsequent period at the end of the term. Businesses offering automatically renewing subscriptions, such as online subscription services Netflix or Hulu, will need to disclose all material terms to consumers and obtain their acceptance prior to finalizing the sale. Businesses also must provide a “clear and conspicuous” post-sale acknowledgment the consumer can retain, such as a receipt, disclosing the automatic renewal offer terms, the cancelation policy, instructions for cancelation, and, if a free trial offer is provided, when the consumer must cancel to avoid being charged.
Additionally, businesses must provide an easy way for consumers to cancel offers, such as a toll-free number, email address, or postal address. One of the most significant provisions requires businesses to provide an online cancellation option for transactions occurring online. This is similar to the requirement Apple already imposes for subscription products obtained using in-app purchases, but without the limitations of a particular purchase ecosystem.
The Attorney General of New York is authorized to enforce the ARL, and violations may result in civil penalties of $500 per violation.
Several other states have already enacted ARLs. Of those states, New York’s ARL is very similar to those of California and Oregon. As subscription products continue to grow in popularity, legislatures are working to keep up and ensure consumers are protected from overly onerous cancelation requirements or hidden terms. If your business offers automatically renewing subscription products, your 2021 compliance strategy should be carefully crafted to account for state ARLs, and especially for those in large markets like New York and California.
* Aaron Parry contributed to this post.