2022 Compliance Landscape for Recurring Subscription Programs | Coie Perkins

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Companies that allow customers to sign up for auto-renewing subscriptions must comply with a patchwork of state and federal regulations. The Federal Trade Commission (FTC) recently issued a Negative Option Marketing Enforcement Policy Statement (Enforcement Policy) that addresses recurring subscription programs. In addition, California, Colorado, Delaware, and Illinois each passed new laws or amended existing recurring subscription laws that will go into effect in 2022. In this update, we highlight some key features of the enforcement policy and new and amended state laws. .

FTC Enforcement Policy: The FTC recently released the Enforcement Policy, which outlines how the FTC could combat unfair and deceptive practices related to recurring subscription programs. The Enforcement Policy reiterates certain requirements under the Restore Online Shoppers’ Confidence Act (ROSCA), such as: (1) clearly and prominently disclosing certain material terms of the transaction, (2) obtaining express, informed consent from consumers before billing them, and (3) providing simple and easy cancellation methods. However, the enforcement policy also suggests that the FTC is looking for brands to take action beyond what is required by ROSCA. For example, the FTC suggests that material terms be disclosed in all subscription-related advertisements (rather than just at the point of sale) in an “unavoidable” manner. The FTC also advises brands to “obtain consumer acceptance of the [recurring subscription] offer functionality separately from any other part of the entire transaction,” which could indicate that the FTC prefers a separate mechanism (e.g., a checkbox) for agreeing recurring subscription terms.

State Laws: In addition to the new state requirements described below, various existing state laws impose requirements on companies offering recurring subscriptions. For example, some states require companies to (1) clearly and prominently disclose certain recurring subscription terms at the point of sale, (2) obtain affirmative customer consent before charging for a subscription, (3) email acknowledgment to subscribers promptly after a subscription that includes certain subscription terms, (4) send subscribers clear and prominent notice of any material changes to the subscription program, and (5) send subscription renewal reminders. subscription at specific intervals. The following updates highlight some of the more unique aspects of the new and updated state laws taking effect this year.

California amended its recurring subscription laws to add new notice and cancellation requirements, effective July 1, 2022.

  • Renewal reminders. Reminders will need to be sent to certain California customers prior to their subscription renewal. The requirement applies to customers enrolled in subscription plans with an initial subscription period of one year or more. Reminders should include certain information about the subscription and how to cancel it, and it should be sent at least 15 and no more than 45 days before subscriptions renew.
  • Free or discounted trial reminders. Reminders will also need to be sent to some California customers before the free or discounted trials they signed up for convert to a paid subscription. The requirement applies to customers enrolled in trial periods longer than 31 days. The reminder must include certain information on when the payment obligation begins and how to cancel before the subscription begins and the customer is charged, and it must be sent at least 3 and not more than 21 days before the end of the trial period.
  • Cancellation procedure. Under amended California law, users who register online should be able to cancel their online subscription immediately and at will, without taking additional steps that interfere with or delay the ability to cancel. The customer must be able to cancel either (1) a preformatted email made immediately available to the consumer by the business that the consumer can send without adding additional information, or (2) a direct link or a prominent button located in the customer’s account, profile page, or in the device or user settings.

from colorado The first law on automatic renewal of subscriptions came into force on January 1, 2022.

  • Renewal reminders. The new law requires brands to send reminder notices at least 25 and no more than 40 days before the renewal of any annual contract and, for subscriptions lasting less than a year, at least 25 and no more than 40 days. before any renewal which extends the duration of the contract beyond the first 12 months and any subsequent period of 12 months. For example, for monthly subscriptions purchased on March 1, 2022, this notice must be sent at least 25 and no more than 40 days prior to the monthly renewal on March 1, 2023.
  • Cancellation procedure. The companies must provide Colorado customers enrolled in subscriptions with a “simple, cost-effective, fast, easy-to-use, and easily accessible” cancellation mechanism.

from Delaware the first law on automatic renewal of subscriptions came into force on January 1, 2022

  • Renewal reminders. Reminders must be sent to certain Delaware customers prior to their subscription renewal. Specifically, for subscription periods greater than 1 month where renewal results in the extension of the subscription more than 12 months after the start of the subscription, the company must send renewal reminders for each renewal at least 30 days and not more than 60 days before the applicable termination deadline. . Reminders should contain certain information about the subscription and how to cancel it. For example, if a company offers a recurring subscription for 6 months and the subscription can only be canceled before the start of the next 6 month period, they can send a renewal reminder 30 days before the start of the 13th month. then again 30 days before the end of each subsequent 6-month subscription period.
  • Cancellation procedure. Companies that allow customers to purchase subscriptions online must allow Delaware customers to cancel their subscriptions online. The proposed cancellation method must be “cost effective, timely and easy to use”.
  • Safe port. Before initiating a private action under Delaware law, customers must provide a company with notice of any alleged violation and a request to rescind the contract extension. No private action may be brought against the Company by the Customer if, within 30 days of sending the notice, the Company remedies the breach and provides applicable written representations to the Customer and the Chief Protection Officer of Consumers from the Delaware Department of Justice.

Illinois amended its law on recurring subscriptions to add a new cancellation obligation, which came into force on January 1, 2022.

  • Cancellation procedure. Companies that allow customers to purchase subscriptions online must provide “cost-effective, timely, and easy-to-use” mechanisms for Illinois customers to cancel their subscriptions. Additionally, Illinois customers who subscribe online must be permitted to cancel their subscription online.

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