As millions of people stayed home during the pandemic, they turned to digital entertainment services, meal delivery services, clothing subscriptions, and online diet and exercise programs. This gave businesses the incentive to shift to a digital subscription model. At the same time, many businesses adopted deceptive subscription marketing policies that make services easy to sign up for but difficult to cancel. On December 13, 2023, Governor Hochul signed an amendment to the New York General Business Law 527-a, which seeks to end unlawful practices of companies offering subscription auto-renewals to consumers.
The law, as originally written, covers all paid subscriptions and purchasing agreements from businesses to individual consumers, and governs contracts with individuals who acquire, by purchase or lease, any goods, services, money, or credit for personal, family, or household purposes. The law does not apply to business-to-business contracts.
Under the new amendment to GBL 527-a, businesses must notify consumers of an upcoming automatic subscription renewal charge at least 15 days (but not more than 45 days) before the charge. The notice must also include how to cancel the subscription. Consumers who accept an automatic renewal must now also be allowed to terminate the continuous service online, which may include a termination email.
Business Requirements for Subscription Auto-Renewals
The law states that businesses must present customers with automatic renewal offer terms in a “clear and conspicuous manner” before fulfilling the subscription or purchasing agreement. If the offer also includes a gift or free trial, the offer must include a “clear and conspicuous” explanation of the price charged after the trial ends or how subscription pricing changes once the trial ends.
To meet the law’s definition of “clear and conspicuous,” businesses must display the auto-renewal terms in a contrasting font type or color than that of the surrounding text or by using symbols that call attention to the renewal offer language.
Additionally, it is illegal for a business to charge a consumer’s credit or debit card for a subscription auto-renewal without first obtaining the consumer’s consent to the service terms.
Companies must also provide an acknowledgment on signing that includes the cancellation policy and how to cancel the subscription. The business must include an easy-to-use mechanism for cancellation in the cancellation policy.
If a business is found to have violated the law, an application may be made by the attorney general for an injunction against the business. If the violation has merit, the court may order restitution.
Businesses Exempt
While the law covers most consumer agreements, some businesses are specifically exempt from this law, including:
- Services provided by a business under a franchise issued by a municipality or a city
- Any entity regulated by the Department of Financial Services (financial institutions, banks, credit unions, etc.)
- Security system alarm operators
- Providers of service contracts that repair, replace, or maintain property
A separate provision of the New York General Business Law (5-903) governs service contracts for the repair, replacement, or maintenance of property. Under this provision, an automatic renewal provision in a contract for services is unenforceable unless the recipient of the services is given written notice between 15 and 30 days before the expiration of a term, highlighting the existence of the contract’s automatic renewal provision. This applies to both business-to-consumer and business-to-business contracts, but only those “for service, maintenance, or repair to or for any real or personal property” with a renewal period of longer than one month.
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