Vermont and the District of Columbia recently joined the growing list of states that have enacted automatic renewal statutes.  Automatic renewal clauses (“auto-renewals”) allow providers of goods or services to bill consumers periodically without obtaining express consent before each billing cycle.  These clauses are becoming increasingly common for a variety of goods and services.  Regulators have expressed concern that consumers may lack clarity as to when auto-renewals apply and what they entail.  As a result, slightly fewer than half of U.S. states have enacted laws that govern how and what businesses need to disclose when an agreement contains auto-renewals.  These state laws add to the regulatory complexity in this space, which includes a federal auto-renewal statute governing online contracts (Restore Online Shopper’s Confidence Act), as well as the federal Telemarketing Sales Rule, which governs auto-renewals offered through telemarketing.

Vermont’s new law, H.B. 593, takes effect on July 1, 2019.  This law is notable for two new requirements described below, but applies only to contracts with an initial term of one year or more and subsequent terms that are longer than one month.  Monthly or quarterly subscription services are not covered by the new statute, and financial institutions and insurance contracts are exempt.

Vermont’s new law imposes two unique requirements:

  • Boldface Disclosures for Auto-Renewals: Many states with an auto-renewal statute require that the auto-renewal be stated “clearly and conspicuously.”  Only a few of these states, such as California and Oregon, define “clearly and conspicuously.”  Vermont goes a step further and specifies that “clearly and conspicuously” means bold-face type.
  • Double Opt-In: Vermont is the first state to require that companies obtain two consents from consumers — one consent to the contract itself, and a second consent to the auto-renewal clause.

Last week, the Mayor of D.C. signed into law the Structured Settlements and Automatic Renewal Protections Act of 2018.  This law requires sellers to disclose the auto-renewal clause clearly and conspicuously (defined as “larger than the surrounding text, in contrasting type, font, or color to the surrounding text of the same size, or set off from the surrounding text of the same size by symbols or other markers”).  If the contract is twelve months or more and will automatically renew for a term of one month or more, the seller must provide notice to the consumer no less than thirty and no more than sixty days prior to the cancellation deadline:  (1) that unless the customer cancels the contract, it will renew automatically; (2) the cancellation deadline; and (3) the methods by which the customer can cancel.  In addition, sellers offering free trials of at least one month that automatically renew must notify consumers one to seven days prior to the renewal and must obtain affirmative consent to the automatic renewal before charging the consumer.

Earlier this week, West Virginia also introduced a new auto-renewal bill, and several other states introduced legislation last term.  So there are likely to be more changes to come in the auto-renewals compliance landscape.  We will continue to monitor these developments and will keep you apprised on this blog.

Photo of Laura Kim Laura Kim

Laura Kim draws upon her experience in senior positions at the Federal Trade Commission to advise clients across industries on complex advertising, privacy, and data security matters. She provides practical compliance advice and represents clients in FTC and State AG investigations. Ms. Kim…

Laura Kim draws upon her experience in senior positions at the Federal Trade Commission to advise clients across industries on complex advertising, privacy, and data security matters. She provides practical compliance advice and represents clients in FTC and State AG investigations. Ms. Kim advises on a wide range of consumer protection issues, including green claims, influencers, native advertising, claim substantiation, Made in USA claims, children’s privacy, subscription auto-renewal marketing, and other digital advertising matters. In addition, Ms. Kim actively practices before the NAD, including recent successful resolution of matters for both challengers and advertisers. She co-chairs Covington’s Advertising and Consumer Protection Practice Group and participates in the firm’s Internet of Things Initiative.

Ms. Kim re-joined Covington after a twelve-year tenure at the FTC, where she served as Assistant Director in two divisions of the Bureau of Consumer Protection, as well as Chief of Staff in the Bureau of Consumer Protection and Attorney Advisor to former Chairman William E. Kovacic. She worked on key FTC Rules and Guides such as the Green Guides, Jewelry Guides, and the Telemarketing Sales Rule. She supervised these and other rule making proceedings and oversaw dozens of the Commission’s investigations and enforcement actions involving compliance with these rules. Ms. Kim also supervised compliance monitoring for companies under federal court or Commission order.

Ms. Kim also served as Deputy Chief Enforcement Officer at the U.S. Department of Education, where she helped establish a new Enforcement Office within Federal Student Aid. In this role, she managed investigations of higher education institutions and oversaw issuance of fines and adverse actions for institutions in violation of federal student aid regulations. Ms. Kim also supervised the borrower defense to repayment division and the Clery campus safety and security division.

Photo of Jayne Ponder Jayne Ponder

Jayne Ponder is an associate in the firm’s Washington, DC office and a member of the Data Privacy and Cybersecurity Practice Group. Jayne’s practice focuses on a broad range of privacy, data security, and technology issues. She provides ongoing privacy and data protection…

Jayne Ponder is an associate in the firm’s Washington, DC office and a member of the Data Privacy and Cybersecurity Practice Group. Jayne’s practice focuses on a broad range of privacy, data security, and technology issues. She provides ongoing privacy and data protection counsel to companies, including on topics related to privacy policies and data practices, the California Consumer Privacy Act, and cyber and data security incident response and preparedness.