CA’s Draconian Consumer Contract Renewal Law

If they aren’t careful, companies that put consumer renewal contracts on-line could end up giving their customers an unintended gift, says a client alert from DLA Piper. California’s Automatic Renewal law goes a lot farther than other laws that have addressed the unsavory practice of getting the customer to unwittingly agree to a contract renewal. An earlier law just required clear and honest disclosure and no fine print. But the Automatic Renewal law requires, among other things, “clear and conspicuous” disclosure – defined as being more conspicuous than surrounding text – and that the disclosure be near the consumer signature or online purchase button. For the law to apply, the company doesn’t need to be based in California as long as the consumer is, and the penalty or remedy can be substantial: All services or product provided by the company following the offending renewal will be considered “an unconditional gift,” and money will have to be funded. The law has been in effect since 2010, but recently it has elicited a number of new class actions targeting national companies that have consumer-interfacing websites.