If You Are Offering Customers an Automatic Renewal or Membership Service, Be Advised: California’s New Law Takes Effect July 1, 2025
Last week, California Governor Gavin Newsom signed Assembly Bill 2863, which amended California’s automatic renewal/continuous service law. There are some important changes to the law that go into effect on July 1, 2025.
The law will require sellers to obtain “express affirmative consent” (adding “express” to “affirmative consent”). While the updated law does not define express affirmative consent, it will likely be interpreted similarly to the FTC definition. Sellers must retain verification of affirmative consent for at least three years, or one year after the contract is terminated, whichever is longer.
The law will prohibit misrepresentation of material facts or terms related to the transaction, as provided. This broadens potential liability to include other misstatements or misrepresentations unrelated to automatic renewals. The FTC’s proposed updated Negative Option Rule contains similar language.
The law makes a few important changes to the cancellation provisions and added a new process related to the presentation of retention offers. Once a consumer indicates a request to cancel, the cancellation must be promptly processed, but unlike the FTC’s proposed updates to the Negative Option Rule, California would allow for a save attempt as long as consumers can quickly cancel without being obstructed, either by interrupting the save attempt or by presenting a button simultaneously online.
- The law requires companies to allow consumers to cancel through the same method they used to sign up and will prohibit companies from obstructing or delaying a consumer’s attempt to cancel.
- While the law does not require telephone cancellations, if a consumer leaves a voicemail requesting cancellation, the business has to either process the cancellation or call the consumer back regarding the cancellation request within one business day.
- If a consumer requests to cancel by telephone, the business may present the consumer with a discounted offer, retention benefit, or information regarding the effect of cancellation, as long as the business first clearly and conspicuously informs the consumer that they may complete the cancellation process at any time by stating that they want to “cancel” or similar words.
- If a consumer conveys a request to cancel by an “online system,” the business may display a discounted offer, retention benefit, or information regarding the effects of cancellation, provided that the business simultaneously displays a prominently located and continuously and proximately displayed direct link or button entitled “click to cancel,” or words to that effect, with the presentation of the discounted offer, other consumer benefit, or information. If the consumer utilizes this direct link or button, the business shall promptly process the cancellation and shall not otherwise obstruct or delay the consumer’s ability to proceed to cancellation. Note that online chats would likely fall under this requirement.
The law will impose additional requirements for notices to consumers after they have agreed to the terms. For example, companies will have to provide notices of any fee changes and send annual reminder notices to consumers under an annual automatic renewal agreement.
- The law clarified that changes in fees are a “material change” in the terms of an automatic renewal or continuous service agreement – this includes changes in fees that the consumer agreed to at the time they previously affirmatively consented to (e.g., the consumer agreed to receive the first shipment at a discount, but subsequent shipments will be at a higher price). Notice of the fee change must be provided no less than 7 days and no more than 30 days before the fee change takes effect. The notice must include clear and conspicuous notice of the fee change and information about how to cancel.
- Under the new law, businesses will be required to send the consumer an annual reminder in the same medium that the consumer used to enter into the agreement that discloses the product or service to which the automatic renewal or continuous service applies, the frequency and amount of the associated charges, and the means to cancel. For transactions that were originally in-person or voice-based, the business can send the reminder by telephone, mail, or any internet-based communication. This applies to all subscriptions that extend beyond 12 months, including subscriptions that renew month to month.
