Following in the footsteps of several states that recently enacted new bills or amended existing legislation on automatic renewal contracts, federal lawmakers have jumped on the bandwagon.
Rep. Mark Takano (D-Calif.) introduced the Unsubscribe Act of 2019, which would apply to automatic renewal contracts, continuity plan contracts and free-to-pay conversion contracts. Pursuant to the bill, sellers would be required to provide consumers with a mechanism to cancel such agreements in the same manner and by the same means in which the agreement was entered.
H.R. 2683 would also mandate that sellers obtain express informed consent and provide notification of the terms of a free-to-pay conversion contract before charging a consumer. In addition, the consumer would perform an “additional affirmative action,” such as clicking on a confirmation button or checking a box, to signal consent to be charged the amount disclosed.
For auto renewal contracts, sellers would be required to provide the consumer with a notification of the terms of the contract no later than 30 days before the end of the initial fixed period. After the initial fixed period in the contract, a copy of the terms must be provided on a quarterly basis while the contract remains in effect.
Similarly for continuity plan contracts, the seller must provide a copy of the notification of the terms on a quarterly basis during the life of the contract. In the case of a material change in the terms, the seller must provide the consumer with a notification of the terms of the agreement as changed before the change takes effect.
Both the Federal Trade Commission (FTC) and state attorneys general would be tasked with enforcement under the proposed legislation, with violators subject to the same penalties found in the FTC Act.
Why it matters: States have been busy regulating auto renewal provisions in recent months, from new laws in North Dakota, Vermont and Washington, D.C., to amendments in California providing for additional protections to consumers. Now federal lawmakers are considering legislation, putting companies on notice of the potential for even more oversight.