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Friday, July 19, 2019

Class action lawyers can benefit from new push for automatic renewal laws; Two states and D.C. follow California's lead


By Charmaine Little | Mar 15, 2019

WASHINGTON (Legal Newsline) – Class action lawyers can take advantage of a recent trend in state legislation to adopt measures similar to a California law that prevents the automatic renewal of certain memberships and subscriptions, like to gyms and magazines.

An example of one of these California lawsuits can be seen in a recent class action consumers filed against Simple Habit Inc. in the U.S. District Court for the Central District of California. The California legislation has ginned up a new focus for class action lawyers there.

Now, Washington, D.C. is the latest to join the ranks of states that have decided to start monitoring how automatic renewal plans are built. Under its new law, companies are required to provide plain and unambiguous details of their automatic renewal and cancellation policies. 

Gonzalo Mon | Kelley Drye & Warren LLP

On top of that, if an agreement between the consumer and the company has a kick-off term of a year or more and is scheduled to automatically renew for another term of at least one month, a business has the obligation to reach out to the consumer via text, email, or an in-app notification between 30 and 60 days before the account is renewed.

There is also a similar rule for companies that give free trials of one month or more. Businesses are required to get the consumer’s permission to sign up for the renewal between one and seven days before the trial ends.

“Other states have similar laws,” Gonzalo Mon, a partner with Kelley Drye & Warren LLP, told Legal Newsline. 

“For example, a Virginia law governing automatic renewals came into effect on Jan. 1, 2019, and a Vermont law will come into effect on July 1, 2019. The laws vary a bit in their scope, but most have similar themes. 

"For example, regulators want to ensure that consumers understand that they are signing up for a service that will automatically renew, so most laws require companies to clearly and conspicuously disclose the material terms of their offers.”

He added that laws also oblige companies to offer a notice before the renewal and give consumers details on methods they can use to cancel.

“A violation of the new (Washington, D.C.) law will render the automatic-renewal provision void and will terminate the contract at the end of the term in which the violation occurred," Mon said.

"Subject to a ‘safe harbor’ provision, a violation of the law will also constitute a violation of the D.C. Consumer Protection Procedures Act. That Act provides a private right of action. Among other things, a consumer who is harmed by an unlawful trade practice may sue for treble damages (or $1,500 per violation, if greater) and attorney’s fees. This increases the risk of class actions.”

Mon encouraged businesses to simply follow the law to prevent being subject to expensive and pricey class actions. He also said it’s vital for businesses to get the required consents and send the necessary notifications, staying in compliance when it comes to communication with consumers. 

He also said it would be a good idea for companies to document how they comply with the law, and not waste time in addressing any setbacks or mistakes.

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