Logos of streaming services are displayed on a screen. States are passing new laws to make it harder for companies to automatically renew subscriptions, sometimes at higher prices, without consumers’ knowledge or consent. Chris McGrath/Getty Images
When Tennessee state Rep. Bob Freeman, a Democrat, examined his cable and internet bill last year, he saw recurring charges for app subscriptions that he didn’t recognize. It turned out that his 14-year-old daughter had signed up for introductory rate plans and never canceled them when they switched to full price.
“I was questioning her bills and she said, ‘Oh, it’s only $1.99.’ Those were teaser rates,” he said in an interview. To actually cancel, he said, he had to send an email to the company for a follow-up call, during which the company representative would try to talk him out of it.
“It was clear that it was not for convenience. … It was clear it was predatory,” he said.
That experience, plus dealing with his grandmother — who signed up for apps for $2.99 a month that were then renewed for $14 without her knowledge — convinced him that a new law was needed to ensure greater transparency and consumer protection .
Freeman has introduced a bill that would require more notice from companies before subscriptions are automatically renewed.
Originally, his bill would also have required companies to get another “yes” from their customers — “affirmative consent” in legislative jargon — before charging consumers’ credit or debit cards. But after strong objections from cable and streaming services, Freeman said, the bill was amended to remove that requirement.
“They all got bent out of shape,” he said of the industry.
In April, Tennessee’s Republican governor, Bill Lee, signed the legislation. State law now requires companies to “clearly and conspicuously notify” consumers if automatic renewal occurs more than 60 days after initial sign-up, and requires them to clearly communicate when they will start charging for the service.
About a half-dozen other states have passed similar laws this year. Companies that rely on subscriptions say some of the stricter measures will only irritate and confuse consumers.
Navdeep Sahni, associate professor of marketing at the Stanford Graduate School of Business, said it’s good for business to give consumers more information about automatic renewals and how to cancel. He said this means consumers would be more open to trying new things and “not be tricked into getting something they don’t want.”
Sahni said companies only hurt themselves when customers feel burned by the experience.
But earlier this year, Michael Powell, president and CEO of NCTA – The Internet & Television Association, warned at a Federal Trade Commission hearing on a proposed federal rule that many customers might misunderstand the “click to cancel” measures. A customer “may face difficulties and unintended consequences if they want to cancel just one service in the package,” Powell said, because “cancelling part of a discounted bundle can increase the price for the remaining services.”
Powell added that “three out of four cable and broadband customers who called to cancel ended up keeping some or all service after speaking to an agent.”
In an email to Stateline, association spokesman Brian Dietz said the organization would have no further comment on the proposed federal rule or similar state laws.
Clearly it wasn’t for convenience. … It was clear it was predatory.
– Tennessee Democratic State Representative Bob Freeman
In Virginia, the new law, which went into effect in July, requires companies to notify consumers of their ability to cancel within 30 days of the end of the trial period. The Minnesota measure, which goes into effect Jan. 1, requires businesses to give customers the option to cancel through a “simple mechanism,” such as a checkbox or submit button.
And a bill sent to California Governor Gavin Newsom earlier this month would tighten an already strict auto-renewal law. Brandon Richards, Newsom’s spokesman, said the governor has until September 30 to sign or veto the bill.
The laws are intended to help people be more aware of what they are signing up for. In a survey by CNET, a consumer-facing website, 48% of respondents said they signed up for a free trial of a paid subscription and then forgot to cancel.
“I’m sure people often don’t get around to that [canceling] it,” said Steve Baker, an attorney and former regional director at the Federal Trade Commission. “And they make it difficult to cancel. It’s not something you necessarily complain about. It’s more of a minor annoyance.”
Freeman, the Tennessee lawmaker, said companies with good products should not fear the new rules. “If you have a good product, and the teaser rate decreases, [I can subscribe]” he said.
Like Freeman, Republican Sen. Todd Weiler of Utah, who sponsored his state’s automatic renewal bill, was motivated by personal experiences. Weiler said he makes a point of setting the date when a discount or free offer expires and the full cost kicks in.
“I consider myself an intelligent person,” he said. “It’s usually easier to find the cancellation information when you sign up, so I go there and stick it in my calendar. I try to be diligent. But sometimes I get caught.”
