Prohibits certain practices by businesses making an automatic renewal or continuous service offer to consumers in the state

Section Two is the definitional section and states that it shall be unlawful for any business making an automatic renewal or continuous service to a consumer in this state to do any of the following:

(a) fail to present the automatic renewal offer terms or continuous service offer terms in a clear and conspicuous manner, and in visual proximity to the request for consent to the offer, before the subscription or purchasing agreement is fulfilled;

(b) charge the consumer's credit or debit card or the consumer's account with a third party for an automatic renewal or continuous service without first obtaining the consumer's affirmative consent to the agreement containing the automatic renewal offer terms or continuous service offer terms; or

(c) fail to provide an acknowledgment that includes the automatic renewal or continuous service offer terms, cancellation policy and information regarding how to cancel in a manner that is capable of being retained by the consumer If the offer includes a free trial the business shall also disclose in the acknowledgment how to cancel and allow the consumer to cancel before the consumer pays for the goods or services.

A business making automatic renewal or continuous service offers shall provide a toll-free number, electronic mail address, a postal address only when the seller directly bills the consumer, or another cost-effective, timely, and easy-to-use mechanism for cancellation that shall be described in the acknowledgment specified under this provision.

In the case of a material change in the terms of an automatic renewal or continuous service offer that has been accepted by a consumer in this state, the business shall provide the consumer with a clear and conspicuous notice of the material change and provide information regarding how to cancel in a manner that is capable of being retained by the consumer.

The requirements of this article shall apply only prior to the completion of the initial order for automatic renewal or continuous service except as follows:

(a) the requirement provided in this section may be fulfilled after completion of the initial offer at the discretion of a business;

(b) the requirement shall be fulfilled prior to the implementation of a material change in the terms of an automatic renewal or continuous service offer that has been accepted by a consumer in this state.

In any case in which a business sends any goods, wares, merchandise or products to a consumer, under a continuous service agreement or automatic renewal of a purchase, without first obtaining the consumer's affirmative consent, the goods, wares, merchandise, or products shall for all purposes shall be deemed an unconditional gift to the consumer, who may use or dispose of the same in any manner he or she sees fit without any obligation whatsoever on the consumer's part to the business, including, but not limited to, bearing the cost of, or responsibility for, shipping any goods, wares, merchandise or products to the business.

A violation of this section shall not be a crime, provided however, that all available civil remedies that apply to a violation of this article may be employed.

If a business complies with this act in good faith, it shall not be subject to civil remedies.

The following are exempt from the requirements of this article:

(a) any service provided by a business or its affiliate where either the business or its affiliate is doing business pursuant to a franchise issued by a political subdivision of the state;

(b) any entity regulated by the department of financial services;

(c) security system alarm operators;

(d) banks, bank holding companies or the subsidiary or affiliate of either, or credit unions or other financial institutions licensed under state or federal law;

(e) service contract sellers and service contract administrators.

Existing law

New law

Justification

An increasing number of consumers are struggling with misleading offers known as automatic renewals of merchandise and services In a typical scenario, consumers believe they made a onetime purchase or signed up to receive a free product Consumers then continue to receive more deliveries of the merchandise, while incurring additional charges to their credit cards or bank accounts Many consumers fail to notice the agreements - generally hidden in the fine print of an order - that they unknowingly commit to while shopping.

This legislation would require that businesses provide automatic renewal or continuous service offer terms in a clear and conspicuous manner before the subscription or purchasing agreement is fulfilled, and provide consumers with a straightforward, no- or low-cost means of cancellation. Companies are also prohibited from advertising products as "free" if the item is only distributed as part of an automatic renewal agreement.

New York consumers should not be lured by false and deceptive practices - nor should it be their responsibility to comb through the fine print of a sales offer to determine if they will be trapped in an automatic renewal offer. This legislation will insure that consumers are made fully aware of the terms and conditions of any offer before they provide credit or debit card information.

Legislative history

New bill

Fiscal implications

None to the state

Local fiscal implications

None to localities

Effective date

This act shall take effect on the ninetieth day after it shall become law.