Bill to protect against unwanted subscription renewals passes

by Mike Rosenberg, Constra Costa Times

Unwanted charges that appear mysteriously from companies that automatically renew product subscriptions without a customer’s consent have ticked off Bay Area consumers enough for a San Mateo senator to take notice.

The state Legislature on Monday passed a bill authored by Sen. Leland Yee that would prevent companies from automatically renewing a customer’s subscription without their consent. Often, by the time the consumer realizes their product or service subscription was renewed it is too late for them to undo the charges.

Senate Bill 340 would impact magazine companies, cosmetic product providers and other businesses that offer low one-time rates, often through television advertisements, then increase their prices once the initial trial period has concluded. They typically bury the renewal notice in the fine print when consumers make their initial purchase, Yee said.

The bill would require companies to state their renewal policy clearly and noticeably when making a sales offer in California. The consumer then would have to consent to the renewal policy, typically by checking a box that outlines what they are agreeing to. Finally, the company would be obligated to make its cancellation process easy and affordable.

The governor will have until late September to sign or veto the bill. If approved, it would take effect in December 2010.

"This is landmark legislation," Yee said. "No other state has really addressed this particular problem."

The bill follows a 23-state lawsuit against Time magazine in 2006. The company eventually paid $4.3 million in refunds as a result of their automatic renewal process, and Yee’s office took notice.

In addition, Yee said his office has regularly received calls from local consumers who claim they are being put on a "merry-go-round" of charges by businesses such as the company that sells Proactiv acne treatment.

"(The bill) addresses a form of deceptive advertising that consumers can be lured into," said Richard Holober, executive director of San Mateo-based Consumer Federation of California. "We’ve seen complaints in this area, particularly with some health products that have been advertising on television, where you think you’re just getting a sample."

Yee said seniors and those who speak English as a second language are most easily "duped" by companies’ "billing schemes."

"Being straightforward with consumers is the only way to go," Holober said. "And I think this bill serves that purpose."