Protecting your business
The ARL requires that companies disclose the automatic renewal terms and obtain express consent from a customer before charging a customer's credit card, debit card or bank account on an ongoing basis. There are several proactive measures a business can take to minimize exposure.
- Disclosure. Terms and conditions should address the statute’s requirements and be disclosed in a manner that is “clear and conspicuous” to the consumer.
- Easy cancellation. Providing a toll-free telephone number, email address, postal address (in those cases where consumers are directly billed) or another cost-effective and easy-to-use mechanism to cancel the program is a good practice.
- Acknowledgment. An acknowledgment that includes the program’s terms, cancellation policy and information on how to cancel after a consumer signs up for the service and/or makes a recurring purchase will also help avoid uncertainty. If an acknowledgment was not sent out prior to completion of the consumer’s initial order, send it out today.
- Arbitration. If the terms and conditions governing the automatic renewal program do not include an arbitration provision with a class-action waiver, consider adding one, immediately.
Companies that use subscription or auto-renew payment mechanisms do well to review their practices to ensure that they are in compliance. California is a highly litigious state with an active plaintiff’s bar. To help ensure compliance, consulting counsel with expertise in this area is prudent.
Joshua Briones, Crystal Lopez and Lauren Miller of law firm Blank Rome focus on bet-the-company class actions and have participated in the defense of dozens of class actions in state and federal courts across the U.S., involving all stages of the litigation and appellate processes.
Sign up for CIO Asia eNewsletters.