BILL ANALYSIS
SB 340
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Date of Hearing: July 7, 2009
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Mary Hayashi, Chair
SB 340 (Yee) - As Amended: July 2, 2009
SENATE VOTE : 37-0
SUBJECT : Advertising: automatic renewal and continuous
service offers.
SUMMARY : Requires a business making an automatic renewal or
continuous service offer to clearly and conspicuously disclose
the terms to the consumer and obtain the consumer's affirmative
consent. Specifically, this bill :
1)Prohibits any business making an automatic renewal or
continuous service offer to a consumer in this state from:
a) Failing to present the automatic renewal offer terms or
continuous service offer terms in a clear and conspicuous
manner before the subscription or purchasing agreement is
fulfilled and in visual proximity, or in the case of an
offer conveyed by voice, in temporal proximity, to the
request for consent to the offer;
b) Charging 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; and,
c) Failing to provide 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 disclose how to cancel and
allow the consumer to cancel before paying for the goods or
services.
2)Requires a business making automatic renewal or continuous
service offers to provide a toll-free telephone number,
electronic mail address, a postal address only when the seller
directly bills the consumer, or another cost-effective,
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timely, and easy-to-use mechanism for cancellation that shall
be described in the written acknowledgment.
3)Requires a business to provide the consumer with a clear and
conspicuous notice of a material change, in the case of a
material change in the terms of the automatic renewal or
continuous service offer that has been accepted by a consumer,
and provide information regarding how to cancel in a manner
that is capable of being retained by the consumer.
4)States that the requirements of this article shall apply only
prior to the completion of the initial order for the automatic
renewal or continuous service, as specified.
5)States that 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 to automatic renewal offer terms, as specified, the
goods, wares, merchandise, or products shall be deemed an
unconditional gift to the consumer.
6)States that a violation of this bill is not a crime, but that
all available civil remedies that apply to a violation of this
bill may be employed, unless a business complies with the
provisions of this bill in good faith.
7)Exempts the following:
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 or a license, franchise,
certificate, or other authorization issued by the
California Public Utilities Commission (CPUC);
b) Any service provided by a business or its affiliate
where either the business or its affiliate is regulated by
the CPUC, the Federal Communication Commission, or the
Federal Energy Regulatory Commission;
c) Any entity regulated by the Department of Insurance;
d) Alarm company operators, as specified; and,
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e) A bank, bank holding company, or the subsidiary or
affiliate of either, or a credit union or other financial
institution, licensed under state or federal law.
8)Becomes operative on June 1, 2010.
9)Defines the following terms:
a) "Automatic renewal" means a plan or arrangement in which
a paid subscription or purchasing agreement is
automatically renewed at the end of a definite term for a
subsequent term;
b) "Automatic renewal offer terms" means the following
clear and conspicuous disclosures:
i) That the subscription or purchasing agreement will
continue until the consumer cancels;
ii) The description of the cancellation policy that
applies to the offer;
iii) The recurring charges that will be charged to the
consumer's credit or debit card or payment account with a
third party as part of the automatic renewal plan or
arrangement, and that the amount of the charge may
change, if that is the case, and the amount to which the
charge will change, if known;
iv) The length of the automatic renewal term or that the
service is continuous, unless the length of the term is
chosen by the consumer; and,
v) The minimum purchase obligation, if any.
c) "Clear and conspicuous" or "clearly and conspicuously"
means in larger type than the surrounding text, or in
contrasting type, font, or color to the surrounding text of
the same size, or set off from the surrounding text of the
same size by symbols or other marks, in a manner that
clearly calls attention to the language. In the case of an
audio disclosure, "clear and conspicuous" and "clearly and
conspicuously" means in a volume and cadence sufficient to
be readily audible and understandable;
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d) "Consumer" means any individual who seeks or acquires,
by purchase or lease, any goods, services, money, or credit
for personal, family, or household purposes; and,
e) "Continuous service" means a plan or arrangement in
which a subscription or purchasing agreement continues
until the consumer cancels the service.
EXISTING LAW :
1)States, under the Unfair Competition Law, that unfair
competition includes any unlawful, unfair, or fraudulent
business act or practice, including any unfair, deceptive, or
untrue advertising, or any act prohibited by the False
Advertising Act (FAA).
2)Prohibits any person with the intent, directly or indirectly,
to sell any goods or services by making or disseminating
statements that the person knows, or should know, to be untrue
or misleading, and prohibits any person from making or
disseminating any untrue or misleading statement as part of a
plan or scheme to sell goods or services at other than the
stated or advertised price.
3)States that any violation of the FAA is a misdemeanor.
4)Provides that any person who violates any provision of the FAA
is liable for a civil penalty not to exceed $2,500 for each
violation that must be assessed and recovered in a civil
action by the Attorney General or by any district attorney,
county counsel, or city attorney.
5)Permits a person who has suffered injury in fact and has lost
money or property as a result of unfair competition to bring a
civil action for relief.
6)Provides for injunctive relief, restitution, disgorgement, and
civil penalties for FAA violations.
FISCAL EFFECT : Unknown. This bill is keyed non-fiscal.
COMMENTS :
Purpose of this bill . According to the author's office, "It has
become increasingly common to receive consumer complaints about
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unwanted charges on his/her credit cards for products or
services that the consumer did not explicitly request or know
they were agreeing to. Consumers report that they believed they
were making a one-time purchase of a product, only to receive
continued shipments of the product and charges on their credit
card. These unforeseen charges are often the result of
agreements enumerated in the 'fine print' on an order or
advertisement that the consumer responded to.
"SB 340 better defines existing law to prevent these harmful and
deceptive practices from occurring in the state. Specifically,
the bill requires businesses to clearly and conspicuously
disclose the terms of the automatic renewal and to obtain the
customer's affirmative consent that they acknowledge and accept
automatic renewal or continuous service terms at the time the
initial agreement or purchase is made."
Background . Current consumer protection statutes do not address
automatic renewal clauses or provisions in subscriptions or
purchasing agreements.
As noted in the author's background material, this bill was
prompted in part by an investigation brought by the attorneys
general of 23 states, including California, against Time, Inc.
The investigations found that subscribers to several magazines
published by Time, Inc. discovered that their subscriptions were
automatically renewed, despite customers' claims that they had
never knowingly consented to the renewals. In 2006, the
investigation resulted in a settlement agreement between the
Attorneys General and Time that requires Time to more clearly
disclose renewal terms and require that consumers take an
affirmative step to acknowledge consent or reject the automatic
renewal offer. According to the author, the specific disclosure
and consent requirements in this measure are modeled after,
though not identical to, those set forth in the Time settlement.
REGISTERED SUPPORT / OPPOSITION :
Support
CALPIRG
Consumer Federation of California
The California Alliance for Consumer Protection
Opposition
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None on file.
Analysis Prepared by : Sarah Huchel / B. & P. / (916) 319-3301