Automatically renewing consumer contracts have been around for a long time. Indeed, such contracts are seemingly everywhere from auto-renewing gym memberships, entertainment channel subscriptions, meal delivery plans and clothes and accessory monthly deliveries. If consumers do not understand the automatic renewal features, such contracts can be financially devastating. Generally, the payment is recurring and, along with the auto-renewal, the payment will be automatic too. If sufficient funds or available balances — on credit cards, for example — are not present, then the consumer ends up being hit with NSF, overdraft and other fees. Many consumer advocates see these sorts of auto-renewal contracts as a form of predatory business practice.

Both the federal and state governments have enacted legislation to regulate these types of consumer contracts. Note that no laws prohibit such contracts. Rather, the statutes require that consumers be given certain protections to ensure that consumers understand what they are agreeing to.

California is one such state. California has enacted the California Automatic Renewal Law (“ARL”) and recently made amendments to the law. The ARL is similar to the federal Restore Online Shoppers Confidence Act (“ROSCA”) which requires “clear and conspicuous” disclosure of the auto-renewal features, informed prior consent and an “easy” mechanism for consumers to terminate the recurring charges. But, the ARL goes further. In particular, if a business is offering a consumer contract with an auto-renewal feature or is a “continuous service” contract, the business must:

• Present the offer — including the auto-renewal feature — in a “clear and conspicuous” manner — this means large fonts, clearly identified links, present on the page without having to “scroll down,” etc.
• Obtain the consumer’s “affirmative consent” before asking for billing information
• Present clear and conspicuous information on how to cancel the auto-renewal and recurring charge feature
• Provide an “easy” mechanism for opting out of the auto-renewal feature

As noted, these are the standard features that are included in the ROSCA and in many other state-level consumer protection statutes. However, the California ARL also requires:

• After the initial “sign up,” the business must provide an acknowledgment of the contract that conspicuously identifies the auto-renewal offer terms
• For cancellation purposes, the business must have and disclose a toll-free phone number, an email address or postal address
• If the contract/service is accepted by a consumer online, then the cancellation method must be “exclusively online” and must be “at will, and without engaging any further steps that obstruct or delay the consumer’s ability to terminate the automatic renewal or continuous service immediately”
• If the business makes a “material change” to the auto-renewal terms, notice must be given to consumers that clearly and conspicuously describes the “material change” AND provides cancellation information

The California ARL also now specifies that reminder notices must be given before the auto-renewal date. Depending on the length of time between renewals and the nature of the contract, the reminder notices must be sent between three and 45 days prior to renewal. Notices must specify that the contract/service will renew unless the consumer takes action and must be sent electronically or via paper. These reminders must conform to many of the same rules as the initial offer. For example, the renewal features must be identified in a clear and conspicuous manner, the length of the renewal period, the methods for cancellation, etc.

Contact the Auto-Renewal Contract Attorneys at Revision Legal

For more information, contact the experienced Automatic Renewal Contract Lawyers at Revision Legal. You can contact us through the form on this page or call (855) 473-8474.

California ARL Penalties and Private Right of Action

Unlike most state consumer protection statutes, California’s Automatic Renewal Law (Business and Professions Code sections 17600 et seq.) creates a powerful compliance incentive through its remedy structure. Under Section 17604, a business that fails to comply with the ARL’s requirements cannot enforce the automatic renewal or continuous service provisions of the contract. More significantly, any goods, wares, merchandise, or products sent to a consumer as a result of a non-compliant automatic renewal are deemed unconditional gifts to the consumer — the consumer is under no obligation to pay for them.

This gift rule creates substantial financial exposure for non-compliant businesses. Class action lawsuits under California’s Unfair Competition Law (Business and Professions Code section 17200) and the Consumer Legal Remedies Act (Civil Code section 1750 et seq.) are the primary vehicles through which private plaintiffs enforce the ARL. California’s class action bar has been aggressive in pursuing ARL claims, and many high-profile California ARL settlements have totaled in the tens of millions of dollars.

Recent Amendments and the Click-to-Cancel Requirement

California amended the ARL in 2021 (effective July 1, 2022) to add a click-to-cancel requirement for online contracts: if a consumer subscribes online, the consumer must be able to cancel online, at will, without engaging any further steps that obstruct or delay cancellation. This provision was a direct response to consumer complaints about subscription services that required consumers to call a phone number, wait on hold, speak to a retention representative, or navigate multiple confirmation screens to cancel a subscription that was accepted with a single click.

The FTC followed California’s lead by finalizing its own Negative Option Rule in October 2024, which includes a national click-to-cancel requirement for most subscription services. Businesses that have already brought their practices into compliance with California’s ARL click-to-cancel requirement should be well-positioned to comply with the federal rule, but a gap analysis is advisable.

Special Rules for Free Trial Offers

California’s ARL imposes heightened requirements on free trial or introductory offer promotions that automatically convert to paid subscriptions. Under Section 17601(b)(2), if a business intends to automatically charge the consumer after a free trial period ends, this must be disclosed clearly and conspicuously — including the price at which the consumer will be charged, the frequency of the charge, and how to cancel before the trial period ends. A compliant free trial offer flow will present the auto-renewal terms prominently on the offer page, obtain affirmative consent through a separate checkbox or confirmation step, send a post-sign-up confirmation email, and provide a simple mechanism for cancelling before the trial ends.

B2B Contracts and ARL Applicability

California’s ARL applies to consumer contracts — contracts between businesses and consumers. Under the ARL’s definitions, a consumer is a natural person who enters into an auto-renewal or continuous service agreement primarily for personal, family, or household purposes. Business-to-business contracts are generally outside the ARL’s scope, though the line can be blurry when a small business owner or sole proprietor enters a contract primarily for professional rather than personal purposes.

Building an ARL Compliance Program

An effective ARL compliance program requires attention at every stage of the customer lifecycle:

• Offer design: Ensure auto-renewal terms are displayed prominently before payment information is requested, in a font size and placement that satisfies the clear and conspicuous standard
• Consent mechanism: Use a separate affirmative consent step — a checkbox, a confirmation button — specifically for the auto-renewal terms, distinct from the general terms of service
• Post-sign-up confirmation: Send an immediate confirmation that prominently restates the auto-renewal terms, the price, the renewal period, and how to cancel
• Reminder notice system: Implement an automated reminder notice system that sends reminders within the required timeframes before each renewal
• Cancellation pathway: Ensure online cancellation is available, immediate, and frictionless — no hold queues, no retention scripts, no mandatory steps beyond a single confirmation
• Material change notice: Before changing the price or terms of an auto-renewing subscription, send a clear and conspicuous material change notice with cancellation information

The consumer protection attorneys at Revision Legal provide ARL compliance audits, contract drafting, and enforcement defense for businesses operating subscription models in California and across the country. Contact us at (855) 473-8474.