All about Automatic Renewal Contracts
This pandemic has caused people to steadily rely on internet commerce. People are buying more and more of their food and other necessities online. Subscriptions for libraries and movie streaming services have also seen a mammoth rise in subscriptions. A lot of them are using Automatic Renewal contracts whether you realized the same or not.
Problems with automatic renewals of contracts
What happens, though, when you want out of a sales or subscription contract but it keeps renewing? You’ve had enough of a particular product you bought and you don’t want to buy any more of it. But the merchant just keeps sending them to you every month and keeps charging you for products you don’t want or need anymore. What happens when you don’t want the service anymore but the merchant keeps on renewing your subscription? What would you do then?
Automatic Renewals clauses may be deceptive
Have you signed up for a contract for goods or services, online, that has an automatic contract renewal without realizing? This means that the contract is continuous until you cancel it. Both federal and state laws heavily regulate these types of automatic renewal contracts.
Section 5 of the Federal Trade Commission Act 15 USC § 45(a) regulates unfair or deceptive practices. Automatic renewals of consumer contracts and continuous contracts fall under unfair or deceptive practices. The FTC has also determined that automatic renewals of contracts often work as a “negative option feature”. This might be a deceptive business practice. There is a “negative option feature” when a contract interprets the customer’s failure to opt out or failure to reject goods or services, or failure to cancel the agreement as an acceptance of the offer. Automatic renewals are a type of negative option feature. This means that once a consumer purchases one product or service online, the merchant rigs their website so that the consumer is automatically “opted in” to an automatic renewal. And for the automatic renewal to stop, the consumer has to cancel the contract. The problem is, the merchant’s websites often make it extremely difficult to cancel the automatic renewal clause.
The Restore Online Shopper’s Confidence Act (ROSCA) 15 USC § 8403 also seeks to regulate this practice. The ROSCA prohibits charging customers unless there has been a clear disclosure of and express consent to material terms. An automatic renewal clause in a contract is a material term because renewals usually means a subscription will have to be paid again.
Why are Automatic Renewal clauses considered as deceptive marketing practices?
The FTC has determined from numerous complaints, investigations and prosecutions that most websites that are rigged to opt consumers into an automatic renewal share a lot of the common features discussed below. Particularly, websites with deceptive practices do not disclose material information that:
- The automatic renewal offer exists. When consumers do not even know that the offer of an automatic renewal exists, they cannot choose to opt in or out.
- At times they transfer the consumer’s billing information to a third party without disclosing the same to the consumer.
- They do not clearly disclose how to cancel the automatic renewal clause. Deceptive merchants do not inform the consumer that the subscription or purchasing agreement will continue until the consumer cancels it. Until that time, consumers’ have to pay recurring charges on their credit or debit cards.
- The websites may put the disclosures in smaller print or on webpages where they will not likely be seen. Websites do not make the text font size and color distinguishable from the surrounding text.
- They do not disclose the automatic renewal clause before the consumers have made a payment or incurred a financial obligation. Essentially, the consumer thinks they have paid for a one-off sale of a product or service. But the contract is worded in such a way that the consumer has really just made a minimum purchase. They are not informed that they have entered into a continuing sale.
- They do not offer their customers the opportunity to choose to renew the contract by ticking a box or clicking on a “submit” button. By automatically opting them in on the renewal clause, the websites do not ask for the customers’ affirmative consent.
- They make cancellations of the automatic renewal burdensome for consumers. Deceptive merchants to not describe the cancellation policy that applies. They do not provide consumers with a simple mechanism to stop the recurring charges on their credit or debit card.
How strict regulations of automatic renewal contracts are?
Aside from the FTC and the ROSCA, the following twenty-five states have laws heavily regulating automatic renewal contracts:
Arkansas, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Illinois, Iowa, Louisiana, Maryland, Missouri, Nevada, New Hampshire, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah and Wisconsin.
These eight states are currently in the process of enacting ARLs:
Alabama, Massachusetts, Minnesota, New Jersey, Vermont, Virginia, West Virginia and Wyoming.
How would you know that you’ve been lured into an automatic renewal contract?
You need to check your statements of accounts, your monthly bills. You must look carefully to see if there are recurring charges from merchants that you do not recognize. The renewal contracts may be a small amount but they may recur each week, every two weeks, or every month. Put together, the small sums add up to a huge amount over time.
What should you do if you suspect an automatic renewal contract?
If you suspect that you may have been lured into an automatic renewal contract, you can always contact the Federal Trade Commission and make an inquiry or a report. You can try to cancel the automatic renewal or order your bank to stop payment for that merchant.
Some merchants are notorious and use different websites, product or merchant names but are essentially one and the same company. There may be a number of people who have also been damaged in the same way as you. Some of those who have been similarly damaged by these deceptive practices have banded together to seek justice for themselves and to stop these unscrupulous websites. They may have begun a lawsuit and you may be able to join that lawsuit so that it can become a class action.
Speak to a lawyer who specializes in class action lawsuits against unscrupulous merchants such as these. You do not have to pay anything just to talk with a lawyer. The lawyer can evaluate the facts in your situation and inform you if you have a cause of action against a merchant. Contact the best class action lawyers at ClassActionNews right now.
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