Gov. Newsom Signs Bill Making It Easier To Cancel, Leave Subscription Services

A bill aimed at making it easier to cancel or leave subscription services and auto-renewing subscription services was signed into law by Governor Gavin Newsom late on Tuesday.

Assembly Bill 2863, authored by Assemblywoman Pilar Schiavo (D-Chatsworth), would change ‘automatic renewal’ and ‘continuous service’ definitions to include a provision of a contract containing those subscriptions or purchasing agreements and to include a plan, arrangement, or provision of a contract that contains a free-to-pay conversion. Businesses wanting automatic renewals would also require them to obtain the consumer’s express affirmative consent to the automatic renewal or continuous service offer terms and would prohibit the business from including any information in the contract that undermines the ability of consumers to provide their affirmative consent. The bill would also require the business to maintain verification of the consumer’s affirmative consent for at least 3 years and send the consumer an annual reminder that discloses, the product or service to which the automatic renewal or continuous service applies, the frequency and amount of the associated charges, and the means to cancel the service.

In addition, AB 2863 requires  the ability to cancel or terminate to be available in the same medium that the consumer used in the transaction that resulted in the activation of the automatic renewal or continuous service, such as having a  toll-free telephone number to be answered promptly during normal business hours and not obstruct or delay the consumer’s ability to cancel the service or feature. Subscription service companies would also need to provide the notice to the consumer before confirming the consumer’s billing information and requiring the notice to include the amount or range of costs the consumer will be charged and the frequency of those charges a consumer will incur unless the consumer takes timely steps to prevent or stop those charges.

In layman’s terms, auto-renewing subscription services that are easy to sign up for but hard to cancel would be easier to cancel under AB 2863. Assemblywoman Schiavo had wrote the bill earlier this year as a way to simplify the cancellation process for subscription services. She noted earlier this year that a 2022 study found that an average of 42% of consumers continue to pay for subscriptions they no longer utilize, costing them approximately $133 more each month.

“The subscription economy makes their money on the backs of consumers, using deceptive practices that cause people to spend more money than they want to,” said Schiavo in April. “Especially at a time when families are struggling just to get by, things like monthly subscriptions can really add up. This bill will protect people’s pocketbooks from these manipulative subscription models. The subscription economy is on track to reach a $1.5 trillion market by 2025, so now is the time to ensure that consumers are protected.”

A subscription service bill

AB 2863 initially saw opposition from the GOP, with the May Assembly vote being 65-0 with 15 abstentions. However, by August, most were convinced, especially with minor tweaks to the bill to make it more palatable, with the Senate vote coming to 36-1 with 3 abstentions and the Assembly voting on it a second time at 75-0 with 4 abstentions.

This led the bill to go to the Governor’s desk where, on Tuesday, Newsom ultimately signed off on it. In a statement, Newsom said that “Nobody wants to get ripped off, whether it’s a small subscription fee that’s seemingly impossible to cancel or massive medical debts which force families into financial ruin. We’re strengthening protections for Californians across the board and helping save consumers money.”

Assemblywoman Schiavo added, “At a time when too many in our community are struggling, unwanted subscription renewals can really add up. AB 2863 is the most comprehensive ‘Click to Cancel’ legislation in the nation,  ensuring Californians can  cancel unwanted automatic subscription renewals just as easily as they signed up – with just a click or two. California is setting a model for the nation on protecting consumers from unnecessary charges – giving them more control over their finances and helping to ensure fair business practices, providing a win for both consumers and small businesses. I’m grateful that this important legislation was signed, as it will mean more money in the pockets of people throughout our community.”

Consumer advocates and groups praised the signing, but warned that companies still needed to put safeguards into place to prevent making it easier to accidentally cancel services.

“That’s where they need to watch out,” said Helen Presley, a subscription service tracker, to the Globe on Wednesday. “Legislation like AB 2863 annoys companies, as some are designed to to keep people on and keep those services coming in. You know, Netflix kept their DVD subscription service for years, with millions of people on it, likely because so many people just never bothered to get out of it. And a lot of places, especially meal service and VPN companies, make you jump through hoops to get out of it. When your business model is dependent on subscribers, you want to keep them by any means necessary, even if it means making it hard to get out of it or staying silent and just charging month to month without a fuss.

“AB 2863 makes things easier, but with still enough consumer action there to make sure they don’t accidently opt out. Not only do companies lose money that way, but many users could be on a needed subscription and suddenly find themselves out of it.”

Governor Newsom has only 5 more days until the end of the bill signing season for the recent session.