The state Senate Judiciary Committee has approved legislation by Sen. Bob Hertzberg (D-Van Nuys) that will protect consumers who sign up for a free trial of a service with an automatic renewal that comes with a charge.
SB 313 also mandates that businesses make it easy for consumers to cancel a service by requiring them to notify consumers three to seven days before they are charged for an automatic renewal. It will also require businesses to obtain a consumer’s authorization for renewals.
“There is no greater consumer protection than requiring transparency. Consumers need to know what they are buying and under what terms, and what they need to do to cancel the arrangement,” Herzberg said. “This legislation makes clear that consumers must directly authorize any renewal of service with a charge and that businesses must make canceling it easy to do.”
In recent years, consumer complaints about automatic service renewals have triggered numerous lawsuits, including class-action lawsuits filed against Hulu, Dropbox and Spotify. While current law states the terms of trial offers and that automatic renewals must be posted on websites or communicated directly to consumers, canceling the service can be difficult, Hertzberg said.
Furthermore, when consumers sign up for free gifts or trial offers that come with an automatic renewal, businesses are not required to get separate authorization for the charged service. Trial offers can run so long – for months or even years – that consumers sometimes forget that the service eventually comes with a charge and can be surprised to see it appear on credit card bills, Hertzberg added.
“Businesses making free trial offers should be open and transparent with consumers about how they can cancel a product or service,” said Richard Holober, executive director of the Consumer Federation of California, which sponsored the legislation. “SB 313 promotes basic fairness by ensuring that consumers know exactly what they are agreeing to, and are not given the run-around if they try to cancel an offer or service.”
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