New York’s New Automatic Renewal Law
On February 9, 2021, SB 1475 – New York’s new automatic renewal law – became effective. New York has now joined numerous states that have enacted similar law related to automatic renewal plans and continuity services, including California. Prior to enactment of SB 1745, New York’s ARL – N.Y. Gen. Oblig. Law § 5-903 – was more limited and narrow in that it only applies to service, maintenance or repair contracts for any real or personal property that have an automatic renewal period of more than one month. This more limited ARL is still effective.
At the federal level, online automatic renewals are aggressively regulated by the Federal Trade Commission pursuant to the Restore Online Shoppers’ Confidence Act. In short, ROSCA requires marketers to clearly disclose all material terms and conditions up front. Key information must not be buried in hard-to-find or hard-to-read mouse print, or behind obscure hyperlinks. Consumers’ express informed consent must be obtained prior to their credit cards being charged. Consumers must also be offered a simple way to stop recurring charges.
At present, there are more than two dozen states that have enacted ARLs, including, but not limited to, California, Connecticut, Florida, Illinois, Nevada, New York, Pennsylvania, , South Dakota, Tennessee, Utah and Wisconsin. Requirements vary, but ARLs generally require clear and conspicuous disclosure of certain terms before the agreement is fulfilled, consent, retainable acknowledgments of material terms, notice of “material” changes and/or reminders in advance of certain renewals.
California’s ARL requires clear and conspicuous disclosure of automatic renewal terms or continuous service offer terms prior to an agreement is fulfilled and in close proximity to the request for consent to the offer, affirmative consent to the agreement containing those terms, a retainable acknowledgment of those terms and any cancellation policy and a retainable notice of any material changes to those terms. California’s ARL was recently amended, adding requirements regarding free gifts and trials and the ability to cancel agreements that are accepted online.
Similar to California’s ARL, the New York ARL encompasses automatic renewals and continuous services.
In short, New York’s ARL requires the seller to present the offer terms in a clear and conspicuous manner prior to the purchasing contract being fulfilled and in visual or temporal proximity to the offer acceptance request. Offer terms must include clear and conspicuous disclosures, including, that the subscription or purchasing contract will continue until the consumer cancels, a description of the cancellation policy, the recurring amount that will be charged, that the amount of the charge may change (if applicable), the amount the charge will change, the length of the automatic renewal or continuity term (unless the term is chosen by the consumer) and any minimum purchase obligations.
Additionally, sellers must obtain affirmative, not passive, consent to offer terms prior to charging the consumer’s credit or debit card or account. Consumers must be provided with a retainable acknowledgment which includes the material offer terms, cancellation policy and information about how to cancel. If an offer includes a free trial, the acknowledgment must also include information on how to cancel and permit the consumer to cancel prior to the consumer remits payment.
Consumers must also be provided a toll-free telephone number, an email address, a postal address (if the seller directly bills the consumer), or another cost-effective and simple cancellation mechanism.
Consumer must be provided with clear and conspicuous notice of any material change in the terms of the offer and provide information on how to cancel in a manner that is capable of being retained by the consumer, before implementation of the material change. Importantly, in the event that a seller fails to first obtain consumer consent, goods or products sent to consumer are deemed an unconditional gift to the consumer.
The New York attorney general is empowered to seek an injunction for a violation of the ARL and courts may impose civil penalties. There is a safe harbor if a business is able to demonstrate that a violation was unintentional, was the result of a bona fide and that reasonable compliance procedures were been implemented.
Marketers that offer subscription plans or continuity services should carefully assess potential exposure under the New York ARL with an experienced FTC defense lawyer and implement preventative compliance measures.
Richard B. Newman is an FTC attorney at Hinch Newman LLP.
Attorney advertising. Informational purposes only. Not legal advice.