In early June, the California State Assembly approved legislation that would make it easier for consumers to cancel subscriptions involving free trials and introductory offers. The legislation, AB 2811, sponsored by Assemblyman Marc Berman (D-Palo Alto), was approved on a 63-0 vote, but would still need to be approved by the California Senate before the end of the legislative session on August 31 to become law.
The legislation amends a 2018 California law that requires merchants to provide a notice of the terms and conditions of an automatic renewal and options for cancellation, which consumers can review and approve. This underlying law includes a troubling provision that gives consumers the ability to sue businesses for non-compliance with its requirements.
The intent of AB 2811 is to give consumers the ability to cancel their subscriptions online without any further interaction with a business. The new legislation would require businesses that provide free trials or low introductory rates on subscriptions that automatically renew to provide consumers with a notice three to seven days before their free trial or introductory rate converts to a higher, recurring charge. The legislation would also require businesses to provide a link or button that allows consumers to terminate their subscription “immediately” and “without engaging any further steps.”
Assemblyman Berman believes the legislation is most needed now, as consumers are increasingly taking advantage of subscription offers while staying at home during the COVID-19 pandemic. However, recent voluntary efforts by private-market entities achieve the same goal of improving the customer experience with subscription renewals.
For example, on April 18, 2020, Visa implemented a new policy for merchants offering free trials and introductory rates on subscriptions. The Visa policy requires merchants to provide notice to cardholders before their subscription converts to the full price and to include a link to manage their account online. A merchant would not have to provide notice before this conversion if a “regular pricing” schedule that increases over the term of the agreement “has been disclosed to, and accepted by, the cardholder at the time of completing the subscription enrollment.” That is, publishers would not have to take additional steps during the time of a free trial or introductory offer, if notice to and acceptance by the consumer has been addressed up front in the enrollment process. This is a well-reasoned and balanced approach.
The Visa subscription policy, which just took effect two months ago, should be given time to see if it will work, without the added burden of regulation. News publishers and other subscription-based businesses are working hard to improve the customer experience and have already invested significant revenue into making changes to their programs and systems to comply with the new Visa requirements.
As we have seen with other legislation originating in California, AB 2811 could set in motion a patchwork of different state laws, which would increase regulatory costs on news publishers and could potentially stunt the growth of reader revenue at a time when publishers need it the most.
We encourage the members of the California Senate to pause approval of this legislation in order to allow enough time for Visa’s new policy to be implemented and evaluated on whether it has enhanced the customer experience with automatic renewal subscriptions.