Auto Renewal Laws Continue to Evolve… Finding Synergy Among New York’s Newest Legislation and California and Federal ARLs

Last November, New York Governor Andrew Cuomo signed into law, S1475A, New York’s new automatic renewal bill. The new law went into effect on February 9, 2021, and contains more stringent and expanded requirements for businesses offering New York consumers automatic renewal plans (i.e., paid subscriptions or membership programs that automatically renew at the end of a certain term) or continuous service plans (i.e., paid subscriptions that continue until the consumer affirmatively cancels. Below are some of the key components of the new law:

• Businesses must obtain New York consumer’s “affirmative consent” to the material terms and conditions of the automatic renewal or continuous service plan before processing their initial payment;
• Obtaining “affirmative consent” requires companies to clearly and conspicuously disclose the material terms of the automatic renewal or continuous service plan, such as cancellation policies and minimum purchase obligations, in a manner that can easily be understood by the consumer;
• The material terms and conditions must be disclosed in “visual proximity” to the affirmative consent mechanism;
• Goods and services that are sent to a New York customer without obtaining prior affirmative consent will be considered an “unconditional gift” to the consumer;
• Businesses must offer user-friendly cancellation options, including an exclusively online option;
• Business must send consumers a post-sale acknowledgement communication (i.e., email or letter) that contains the material terms and conditions of their automatic renewal or continuous service offer; and
• For “free” trial offers, businesses must disclose the cancellation options available to the New York consumer before they are required to pay for the goods or services.

Fashioned after the provisions of the Restoring Online Shoppers’ Confidence Act (ROSCA), which is enforced by the Federal Trade Commission (FTC), and California’s more stringent ARL, New York’s new ARL represents another step in the direction of heightened scrutiny of goods and services that are offered on a subscription or auto-renew basis.

While New York is the latest state to pass a more restrictive ARL, it certainly will not be the last. As more and more businesses make the transition from brick and mortar to e-commerce, subscription and auto-renew plans will continue to increase in popularity, which means state scrutiny of these subscription and auto-renew plans will increase as well. Indeed, it was the accelerated growth of e-commerce that led California to enact its ARL back in 2018, with a particular emphasis on making it easier for California consumers to cancel their auto-renew subscriptions and memberships online. Some key considerations for companies contemplating an overhaul of their subscription and auto-renew compliance programs are set forth below: 

• State ARL laws are not uniform in scope or requirements, and 20+ states have such laws on their books. In addition to the disclosure requirements at the point of sale, many states require continuing notice prior to each renewal of the subscription or plan that gives consumers an opportunity to cancel and to prevent unwanted renewals from occurring.
• Because of the variance in requirements among state ARLs, e-commerce companies doing business in multiple states should execute a single and consistent approach to ARL that complies with the states in which they do business.
• California’s ARL applies generally to all consumer contracts, while other states limit the scope of contracts covered by the ARL.
• Because many sellers operate in all 50 states, compliance with California’s strict ARL requirements will ensure compliance with all other state laws.