Vermont and the District of Columbia recently joined the growing list of states that have enacted automatic renewal statutes. Automatic renewal clauses (“auto-renewals”) allow providers of goods or services to bill consumers periodically without obtaining express consent before each billing cycle. These clauses are becoming increasingly common for a variety of goods and services. Regulators have expressed concern that consumers may lack clarity as to when auto-renewals apply and what they entail. As a result, slightly fewer than half of U.S. states have enacted laws that govern how and what businesses need to disclose when an agreement contains auto-renewals. These state laws add to the regulatory complexity in this space, which includes a federal auto-renewal statute governing online contracts (Restore Online Shopper’s Confidence Act), as well as the federal Telemarketing Sales Rule, which governs auto-renewals offered through telemarketing.
Vermont’s new law, H.B. 593, takes effect on July 1, 2019. This law is notable for two new requirements described below, but applies only to contracts with an initial term of one year or more and subsequent terms that are longer than one month. Monthly or quarterly subscription services are not covered by the new statute, and financial institutions and insurance contracts are exempt.
Vermont’s new law imposes two unique requirements:
- Boldface Disclosures for Auto-Renewals: Many states with an auto-renewal statute require that the auto-renewal be stated “clearly and conspicuously.” Only a few of these states, such as California and Oregon, define “clearly and conspicuously.” Vermont goes a step further and specifies that “clearly and conspicuously” means bold-face type.
- Double Opt-In: Vermont is the first state to require that companies obtain two consents from consumers — one consent to the contract itself, and a second consent to the auto-renewal clause.
Last week, the Mayor of D.C. signed into law the Structured Settlements and Automatic Renewal Protections Act of 2018. This law requires sellers to disclose the auto-renewal clause clearly and conspicuously (defined as “larger than the surrounding text, in contrasting type, font, or color to the surrounding text of the same size, or set off from the surrounding text of the same size by symbols or other markers”). If the contract is twelve months or more and will automatically renew for a term of one month or more, the seller must provide notice to the consumer no less than thirty and no more than sixty days prior to the cancellation deadline: (1) that unless the customer cancels the contract, it will renew automatically; (2) the cancellation deadline; and (3) the methods by which the customer can cancel. In addition, sellers offering free trials of at least one month that automatically renew must notify consumers one to seven days prior to the renewal and must obtain affirmative consent to the automatic renewal before charging the consumer.
Earlier this week, West Virginia also introduced a new auto-renewal bill, and several other states introduced legislation last term. So there are likely to be more changes to come in the auto-renewals compliance landscape. We will continue to monitor these developments and will keep you apprised on this blog.