Auto-renewing subscriptions are irritating. Some states are cracking down.

At least 20 states have laws on the books regulating predatory subscription models. Is federal regulation on the way?

Sally Greenberg, executive director of the National Consumers League

National Consumers League executive director Sally Greenberg developed a list of best practices for subscription models.

Photo: Andrew Harrer/Bloomberg via Getty Images

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Everyone knows the feeling of checking a credit card statement to see random charges from subscriptions you forgot you signed up for last year, last month or even last week. You rack your brain: Was it really that expensive? And why didn’t you get a warning before the charge?

Auto-renewing subscriptions can sneak up on you without warning. Sometimes you just don’t expect the fee to hit at a specific time — setting a reminder for future you is helpful in those instances — but companies have also been known to renew contracts on an irregular basis or after lengthy periods of time. Others might increase the cost of a subscription over time without asking you whether you want to opt out.

At least 20 states, as well as the District of Columbia, have some type of law on the books that regulates auto-renewing subscriptions, many of them spurred by legislators’ own experiences. Some of the laws are narrow and focus on only one type of subscription, like online subscriptions or those related to gyms (perhaps the most annoying of all). But at least five bills passed since 2018 force companies to offer advance notice and ease of cancellation for subscriptions in most circumstances, with enforcement measures in place to hold companies accountable should they not comply.

Colorado state Rep. Cathy Kipp championed such a law regulating subscriptions in Colorado after a friend couldn’t get out of a dating app subscription.

“They said, ‘No, you’re not getting your money back,’” she said. “We were like, ‘Well, that’s just not OK.’”

As state laws race (or rather, crawl) to catch up with our increasingly subscription-oriented lives, a lot of subscription regulation comes from Apple and Google. Sneaky app subscriptions have been known to surprise users with surprisingly high new rates, lure customers into free trials that only last a few days or less or mislead people into thinking they’ve signed up for shorter subscriptions than they intended.

Currently, app developers don’t have to ask iPhone or Android users whether they’re OK with being charged for a recurring subscription upon renewal. Developers do have to ask users to opt in to price increases with a push notification, and users have to actually tap “I agree” to continue. But Apple is piloting a change to that policy, starting with Disney+. The test alerts subscribers that the price is increasing, but instead of opting in, they have to opt out.

States tackle annoying auto-renewals

Colorado’s subscription law went into effect Jan. 1, 2022, and applies to all industries, whereas a previous Colorado law only regulated health club subscriptions. It requires upfront disclosure of subscription terms, simple methods of cancellation and renewal notices. Companies that violate the rules are subject to civil penalties up to $20,000 per violation, or $50,000 per violation in cases where the customer was over 60 years old.

Many of the laws regulate predatory cancellation processes, which are deliberately opaque to make it difficult for a consumer to get out of a subscription. These include processes which require customers to show up in person, wait endlessly on the phone to speak to someone or pay for additional months or years before they can get out of a contract. Colorado’s law, for example, requires that cancellation mechanisms be “readily accessible” and that companies in violation refund overpaid subscription fees.

Companies resort to these tactics because it makes them money. And that’s not always a bad thing for consumers who might not want to confirm they still want something every week, month or year. Regardless, it’s likely in a company’s best interest to avoid annoying customers, which is inevitable when it auto-renews subscriptions just to squeeze out some extra cash.

National Consumers League executive director Sally Greenberg has developed a list of best practices for subscription models informed by her work advocating for stricter regulations. She said a good subscription model gives customers full disclosure of the terms when they enroll, notifies customers in advance of each time they’re charged, explains any price increases and lists cancellation procedures in clear, conspicuous font somewhere they will definitely see them.

Laws that regulate subscription models, she said, should also require that companies will give customers a full refund with an added penalty should they not comply with the law.

“There has to be financial risk,” she said.

State laws that comply with all of Greenberg’s guidelines (especially that last one) are hard to come by. But laws in California, Delaware, Idaho, Delaware, Colorado, New York and Washington, D.C., all require customers to be notified before charges, and require companies make it at least somewhat easy to cancel.

Where these laws differ most widely is in enforcement. In New York, companies that violate auto-renewal laws not only receive fines and a possible injunction in the state, but also must allow customers to keep whatever they received as part of the subscription as a “free gift.” Idaho’s law, on the other hand, doesn’t outline any specific penalties.

“We try to be business-friendly and don’t want to put businesses in a corner,” said Idaho state Sen. Jim Patrick, who is also chair of the committee which sponsored the bill. Patrick said the state is hesitant to pass any new regulations on businesses at all — perhaps a testament to how important the state saw this particular bill.

Even with state laws on the books, most attorneys general don’t have the resources to chase after bad subscription providers. In an emailed interview with Protocol, Colorado Attorney General Phil Weiser said that enforcement has required extensive outreach to customers, ostensibly to inform them of their rights, and companies throughout the state. Kipp said that she had personally called several news companies that charged her for an auto-renewing subscription without notice only to find out they weren’t aware they were in violation of Colorado’s barely 4-month-old law. And Patrick pointed out that companies outside of the state are often too much effort to pursue.

“For us to go find somebody in California — well, it just isn’t going to work,” he said.

Federal subscription legislation gathers steam

Momentum has gathered behind a federal law that would more tightly regulate predatory subscription models. Weiser pointed to the 2010 Restore Online Shoppers’ Confidence Act, or ROSCA, as a model for the Colorado bill, as it includes requirements for companies to provide “simple” cancellation mechanisms. However, its definition of “simple” is vague, and some companies have used it as an excuse to not offer online cancellation options or to require customers to call a customer service line during a narrow time window.

The FTC also reviewed its rulebooks last summer to see whether it had any power to curb predatory subscription practices. The agency found it could use some rules put in place nearly five decades ago, in 1973, to bring cases against a children’s education company, DirecTV and a few others. The regulations prohibit companies from interpreting a customer’s silence as consent to charge them, but are loose and out of date. Greenberg said that it’s important customers report predatory practices to the FTC, especially while they work on updating their processes.

But federal legislation could change things. The Unsubscribe Act would make it so customers can cancel subscriptions in the same manner they signed up — i.e., if they only had to click a single “subscribe” button to be enrolled, cancellation should be a one-click process, too. It also requires that companies be explicit about contract terms before enrollment, ask for additional consent to charge a customer when they transition from a free trial to a paid subscription and remind customers about the plan on at least a quarterly basis.

The bill has died before in the House, but as the COVID-19 pandemic turned us all into online shoppers, lawmakers became more aware of irritating subscription practices. The bill has been championed for years by California Democrat Mark Takano, who reintroduced it last summer. Sens. Brian Schatz, John Thune, Raphael Warnock and John Kennedy sponsored companion legislation in the Senate.

Simultaneously, Sens. Chris Van Hollen and Yvette Clarke are pushing for even more aggressive regulation in the form of the Consumer Opt-In Act. This bill would require companies to obtain affirmative consent from customers to charge their credit card any time a long-term subscription is renewed, at least once a year in the case of short-term auto-renewing contracts and in any case where a customer has not used a subscription product for at least six months.

It’s possible neither law will pass this session — between a war in Ukraine, ongoing supply-chain and COVID-19 crises and the coming midterms, Congress has higher priorities. But it’s hard to deny momentum for federal regulation is mounting.

“There’s a lot of interest among senators, and that’s something new,” Greenberg said. “There’s no [state] bill which includes all the requirements we would like to see, but there’s certainly an effort to curb abuses.”


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