Skip to Navigation Skip to Content

California’s Automatic Renewal Law (ARL) was introduced to protect consumers from unwanted recurring charges, often stemming from unclear subscription and membership services. With the increasing number of online businesses offering subscriptions, this law ensures transparency and gives consumers the power to manage and cancel such subscriptions more easily. The ARL requires businesses to disclose recurring fees, seek explicit consent before charges, and provide reminders for upcoming renewals.

In this article, we will walk you through the essentials of California’s ARL, who it applies to, the key compliance requirements, and the penalties for non-compliance.

Generate your own Privacy Policy in under 5 minutes

Get Started

Background

The California Automatic Renewal Law (ARL) (Cal. Bus. & Prof. Code §§ 17600) is a consumer protection law designed to prevent companies from automatically renewing customer subscriptions without proper notice and consent. It focuses on ensuring that consumers are fully informed about any recurring payments they might incur and that businesses operate with transparency.

The ARL specifically targets:

  • Businesses that charge recurring fees for memberships or subscription services.
  • Ensuring that consumers are aware of such fees.
  • Requiring companies to notify customers about upcoming charges before they happen.

The law was enacted to tackle complaints from consumers who were blindsided by unexpected subscription renewals and charges. By mandating clear and conspicuous disclosures, California’s ARL significantly reduces the likelihood of customers being charged for services they no longer want.

Application

The ARL applies primarily to California-based businesses and online platforms that sell recurring subscriptions or memberships. Whether the business operates within California or sells services to California residents, it must adhere to the ARL when dealing with automatic renewals.

Who is Exempt?

There are specific exceptions under the ARL:

  • Free memberships: If a membership is entirely free (not just a free trial), the ARL doesn’t apply.
  • Offline subscriptions: If a subscription or membership is obtained through offline methods (e.g., in-person or via mail) and the business doesn’t collect electronic contact information (such as email addresses or phone numbers), certain provisions of the ARL may not apply. However, if the subscription was initiated online, the ARL still applies.

For example, if a non-profit collects membership fees solely via mailed forms without retaining members’ email addresses or phone numbers, they are generally exempt from the ARL’s notification requirements. But, if a consumer later requests a cancellation, the business is required to honor it.

Key Requirements

To comply with the ARL, businesses must meet several critical requirements when offering automatic subscription renewals. These provisions are outlined in California Code § 17602:

  1. Consent for Recurring Charges

Businesses must obtain clear and explicit consent before charging customers for recurring subscriptions. This means a customer should know upfront that their credit card will be charged regularly, rather than being misled into thinking a subscription involves a one-time payment.

What to Include:

  • The cost of the subscription.
  • The renewal frequency.
  • The duration of the agreement (if applicable).
  • How to cancel the subscription.
  • A clear statement that the agreement will renew automatically unless the customer cancels.

This information should be displayed prominently at the point of sale, not buried in fine print or hidden behind multiple clicks.

  1. Post-Purchase Confirmation

After a customer agrees to a recurring subscription, businesses must send a confirmation email that:

  • Restate the key terms of the agreement.
  • Outlines the process for cancellation.
  • If applicable, details when a free trial will end and when charges will begin.
  1. Reminder of Upcoming Renewals

A crucial part of the ARL requires businesses to send a reminder notification before renewing an annual subscription or a free trial period exceeding 31 days.

For annual subscriptions, the reminder must be sent 15 to 45 days before the renewal date.

For free trials lasting over 31 days, the reminder must be sent 3 to 21 days before the end of the trial.

These reminders help prevent consumers from being caught off guard by renewal charges. The reminder must include:

  • A notice that the customer will be charged unless they cancel.
  • The amount they will be charged.
  • The renewal period length.
  • Information on how to cancel.
  1. Immediate Cancellation Mechanism

As of July 1, 2022, the ARL mandates that businesses provide customers with an immediate, easy-to-use cancellation method. This can be a cancellation button or link within the user’s account settings or billing page. The cancellation process must be quick and straightforward, with no unnecessary hurdles or steps like calling customer support.

Businesses can also offer an option for customers to send a preformatted email to customer support, but this email should be generated through a link or button—eliminating the need for the customer to write an email themselves.

Penalties for Non-Compliance

Non-compliance with the ARL can result in serious penalties, both financially and legally. There are two main types of penalties:

  1. Consumer Protection Lawsuits
    Private lawsuits can be filed by customers who feel they were wronged by a business not complying with the ARL. These lawsuits can result in settlements or damages paid to the affected consumers.
  2. Civil Penalties
    Businesses can face civil penalties of up to $2,500 per violation. Since penalties are applied per violation, even a small number of infractions can lead to substantial financial losses.

How to Ensure Compliance

To avoid legal trouble and hefty fines, businesses must follow these steps:

  1. Clear and Conspicuous Disclosures: Ensure that all subscription terms are easy to find, clearly visible, and presented in larger or contrasting fonts to catch the customer’s attention.
  2. Consent First: Never charge for a subscription without obtaining the customer’s explicit consent, and make sure they understand the terms.
  3. Post-Sale Confirmation: Always send a confirmation email after a customer signs up for a subscription, outlining the renewal terms and cancellation process.
  4. Send Renewal Reminders: Stay on top of reminders for annual subscriptions or free trials longer than 31 days, sent well within the required time frames.
  5. Easy Cancellation: Offer a hassle-free, immediate method for cancellation, accessible directly through the customer’s account or a preformatted email option.

Wrapping Up

The California Automatic Renewal Law (ARL) serves as a safeguard for consumers against unauthorized recurring charges. Businesses must stay compliant by being transparent about their subscription terms, obtaining explicit consent, sending post-sale confirmations, and making it easy for customers to cancel subscriptions. Failure to comply can result in costly lawsuits and civil penalties, as well as damage to a company’s reputation. By adhering to the ARL’s guidelines, businesses can maintain consumer trust while avoiding significant legal risks.

For additional support, resources, & more, consider utilizing GetTerms. For more information, you can visit our website here. We offer a simple solution, ensuring you meet legal standards while maintaining user confidence in your data handling practices. Create an account and get started in 5 minutes. For any further questions or assistance, the GetTerms support team is always ready to help.

Generate your own Privacy Policy in under 5 minutes

Get Started