Companies use free or reduced rate trial periods as an introductory gimmick in a range of markets. These trials are a useful, albeit tricky, advertising ploy that offer users a sample of the product in hopes that the consumer will pay full price in the future. In most cases, these trials feature an “auto-renewal”, meaning unless otherwise cancelled, the user will be charged again without a second warning. These renewals are otherwise referred to as “negative option marketing”. Frustrating as it may be when you forget to cancel a running subscription, these arrangements are mostly legal. But there are instances when they cross a line.
Automatic Renewal Laws
Auto-renewals, as previously stated, are a form of negative option marketing. This means that when you sign up for a trial, you are also signing on for the automatic continuation of payment after the trial ends. Unfortunately, simply forgetting to cancel before the trial ends is not typically grounds for a consumer case.
Holding companies accountable for auto-renewal violations of any type is not simple. Instead of one piece of comprehensive legislation that covers all aspects of this issue, there is a patchwork of ARL. An experienced consumer protection attorney may be able to help you determine the best way to approach your auto-renewal case.
Unfair and Deceptive Trade Practices
The Unfair and Deceptive Trade Practices Act (UDTPA) is a consumer’s first line of defense when engaging in a subscription service.
North Carolina’s version of the federal law (General Statute 75-41) requires businesses to:
- Disclose the automatic renewal clause clearly and conspicuously
- Provide (also clearly and conspicuously) a cancellation method
In North Carolina, there is no definition of what “clear and concise” means in practice. Each case will likely have to navigate this question along the way, but there is some precedent.
Last month the self-styled “weight-loss” app Noom was ordered to pay $56 million for a class action alleging the app ripped off millions of users with deceptive auto-renewal practices. Class members say it is difficult to cancel the subscription because Noom puts up several barriers to do so. The suit says the company cannot cancel through email, mail, phone, fax, or the website. Instead, subscribers had to cancel through their “virtual coach”. The users who didn’t cancel were liable for a $199 nonrefundable payment.
Businesses making sales online must also comply with the Restore Online Shoppers’ Confidence Act (ROSCA), a federal law that requires sellers to describe the terms of a contract upon sign-up.
Penalties
Just like the array of laws that cover the topic, penalties vary. If you’ve forgotten to cancel a subscription, many companies simply allow you to cancel and reach out for a refund. If the company explicitly breaks ARL, they will likely face high legal costs plus refunds to customers.
Representation for Unfair and Deceptive Auto-Renewal Subscriptions
Businesses have an obligation under consumer law to make it clear that signing up for free will include an auto-renewal at the trial’s end.
If you believe that you have been a victim of unfair and deceptive practices, please reach out to our experienced consumer protection attorneys today.
Maginnis Howard offers free consultations for consumer claims to North Carolina residents. For more information, contact our office at (919)-526-0450 or submit a message through our contact page. Our office may ask you for documents to appropriately assess your case.
