Has a business or service charged you an automatic auto-renewal fee? Want to know whether the auto-renewal fees are legal or appropriate? Well, it depends on the auto-renewal laws of the State you live in.
More States Stepping in with Auto-Renewal Laws in an Effort to Protect Consumers
Slightly fewer than half of U.S. states have automatic renewal statutes that govern how and what businesses need to disclose to a consumer when an agreement contains an auto-renew clause. Automatic renewals are when a goods or service provider bills you periodically without getting your express consent before each time it bills you. This is common with gym memberships, where you sign up once but are charged monthly for your membership without the gym calling you each month to ask you if it is okay. You can go a year without ever seeing or talking to anyone from that gym yet still be billed each month.
Automatic renewals can be convenient for both the consumer and the business, provided that both parties are on the same page. Some businesses may try to take advantage of the fact that consumers may not realize they are agreeing to automatic renewals or are likely to forget about them. Many states have passed auto-renew laws to give consumers more clarity about when these provisions apply and what they entail, though there are differences depending on the state.
California, Connecticut, Illinois, and Oregon have perhaps the strictest automatic-renewal laws
One of the most robust auto-renew laws is in California. California law requires businesses that offer good or services through auto-renew to ask for consent from consumers for automatic renewal and to provide conspicuous language explaining the terms. The business must also offer a cheap and easy way for customers to cancel their subscriptions, such as a toll-free number or an email address. Connecticut, Illinois, and Oregon have similar laws.
While California’s law applies to all kinds of goods and services, other states have narrower laws. For example, Florida and Georgia’s laws only apply to services. Even more narrowly, New York and Utah’s laws only apply to service contracts for repair or maintenance of real or personal property. Many other states’ automatic renewal statutes only apply to very specific categories, such as health clubs. This is true for Maryland, New Hampshire, and South Carolina. Similarly, Rhode Island’s law only applies to leases of personal property, Tennessee’s only applies to alarm services and buyers clubs, and South Dakota’s is only relevant to telecommunications contracts.
Further, the remedies available for consumers also vary. In a state with a broad law like California, there is a private right of action for consumers to sue the business. Conversely, in more narrowly protective states, violations of automatic renewal laws may constitute grounds to sue under unfair business practices laws, or merely be void and unenforceable parts of the contract.
Different states sometimes have substantively different laws, as is the case for automatic renewals. Consumers need to find out the laws of their state so they know what requirements and protections apply.