In today’s digital age, recurring or renewing subscription revenue models are commonplace for companies offering subscriptions, memberships, or ongoing services. Consequently, there are an array of consumer protection statutes in the country governing these business’ renewal practices. One of the most comprehensive of those laws is California’s Automatic Renewal Law (ARL), codified in California Business & Professions Code §§ 17600–17606, which originally went into effect in 2022. The ARL applies to companies offering any type of automatic renewal or continuous service to California consumers.
Recently, new amendments to California’s ARL have been adopted that enhance the already existing consumer rights with regard to subscription renewals. The amendments will take effect on July 1, 2025 and will apply to contracts “entered into, amended, or extended” on or after that date, which means it will apply to many existing subscriptions and contracts. If your company offers any type of automatic renewal or continuous service to California consumers, it is crucial to understand your increased obligations resulting from the amendments of California’s ARL.
Key Changes to the ARL
The amended ARL expounds on many of the existing ARL requirements such as affirmative consumer consent to renewals, notice of material changes to renewal terms, and clear and conspicuous instructions for cancellation.
Some of the more material changes include:
- Free Trials. The requirements will now also apply to free trials.
- Heightened Consent Requirements. The amended ARL prohibits putting any information in the contract that would interfere with or undermine the consumer’s ability to provide affirmative consent. Business also need to retain proof of consent for at least three years, or for one year after the contract is terminated, whichever is longer.
- Increased Attentiveness to Cancellation Requests.
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- The amended law will require a cancellation option to be available in the same medium that the consumer used in the transaction that resulted in the activation of the automatic renewal or continuous service, or the same medium in which the consumer is accustomed to interacting with the business, including in person, by telephone, by mail, or by email
- If a business offers cancellation by phone, it will not be allowed to obstruct or delay a consumer’s ability to cancel the automatic renewal or continuous service, including requiring that business answer the phone during regular business hours and responding to consumer voicemails requesting cancellation within one (1) business day.
- Time Window Added to Notice of Fee Changes. The amended law will add a required time window for notices of material changes if the material change relates to recurring fees; the notice will need to be sent between seven (7) and thirty (30) days before the fee change takes effect.
- Renewal Reminders. Businesses will need to provide annual renewal reminders for any renewing or continuing consumer contract still in effect. The renewal reminders will need to be sent before confirming the consumer’s billing information and will need to include the applicable product or service, the amount and frequency of charges, and the options for cancelling. Additionally, the annual renewal remind must be provided in the same medium that resulted in the activation of the automatic renewal or continuous service, or the same medium in which the customer is accustomed to interacting with the business.
Enforcement Measures
Violations of the ARL may lead to:
- Regulatory enforcement by the California Attorney General or local prosecutors
- Private lawsuits, including class actions
- Claims under the Unfair Competition Law (UCL)
The ARL is hotbed for both regulatory and private enforcement. There has been a steady stream of lawsuits and enforcement actions by the plaintiff’s class action bar and government regulators to enforce these laws. These cases, as in all litigation matters, can be costly to defend.
What Business Should Do
We recommend that our clients review their contract terms, renewal reminders, cancellation procedures, and other related components of continuing and automatically renewing agreements to ensure compliance with the ARL and its amendments. Given the ever changing laws in this arena, it is best to stay on top of your policies to ensure continued compliance.
Federal Rule
Even if you are not in California and do not offer services to residents in California, automatic renewal legislation may still apply to you. As mentioned in our January Perspectives Article, the Federal Trade Commission (FTC) just issued its own “click-to-cancel” rule, which becomes enforceable on May 14, 2025, and largely mirrors the information contained in the ARL. That article can be referenced here: https://sfcounsel.com/the-ftc-announces-final-click-to-cancel-rule/
Scherer Smith & Kenny LLP regularly advises businesses on these types of compliance matters. If you have concerns about your compliance or need help navigating ARL obligations, please reach out to Heather G. Sapp ([email protected]) or Brandon D. Smith ([email protected]) and we would be happy to assist.
– Written By Heather G. Sapp