BILL ANALYSIS
SB 340
Page 1
SENATE THIRD READING
SB 340 (Yee)
As Amended August 20, 2009
Majority vote
SENATE VOTE :37-0
JUDICIARY 10-0 BUSINESS &
PROFESSIONS 11-0
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|Ayes:|Feuer, Tran, Brownley, |Ayes:|Hayashi, Emmerson, |
| |Evans, Jones, Knight, | |Conway, Eng, Hernandez, |
| |Krekorian, Lieu, Monning, | |Nava, Niello, |
| |Silva | |John A. Perez, Ruskin, |
| | | |Smyth, Monning |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Requires any business making an "automatic renewal" or
"continuous service" offer to clearly and conspicuously, as
defined, disclose terms of the offer and obtain the consumer's
affirmative consent to the offer. Specifically, this bill :
1)Makes it unlawful for any business making an automatic renewal
offer or a continuous service offer to a consumer to do any of
the following:
a) Fail to present the offer terms in a clear and
conspicuous manner, as defined, 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) Charge the consumer's credit or debit card or the
consumer's account with a third party for an automatic
renewal or continuous service offer without first obtaining
the consumer's affirmative consent; or,
c) Fail to provide 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 the consumer pays for the goods
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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 if the seller
directly bills the consumer, or another cost-effective,
timely, and easy-to-use mechanism for cancellation that shall
be described in the written acknowledgment.
3)Specifies that in the case of a material change in the terms
of an automatic renewal or continuous service offer that has
been accepted by the consumer, 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.
4)Specifies that the requirements of this bill shall only apply
to the completion of the initial order for the automatic
renewal or continuous service, except as provided.
5)Provides that in any case in which a business sends any goods,
wares, merchandise, or products to a consumer, under a
continuous service or automatic renewal, without first
obtaining the consumer's affirmative consent, in the manner
required by this bill, then the goods, wares, merchandise, or
products shall be deemed an unconditional gift to the
consumer, and the business shall bear any shipping or other
related costs.
6)Provides that violation of the provisions of this bill shall
not be a crime, but that all civil remedies that apply to a
violation may be employed. Specifies, however, that if a
business complies with the provisions of this bill in good
faith, it shall not be subject to civil remedies.
7)Exempts from the provisions of this bill any service provided
by certain businesses or entities, including those regulated
by the California Public Utilities Commission, the Federal
Communications Commission, the Federal Energy Regulatory
Commission, or the Bureau of Electronic Appliance or Repair.
EXISTING LAW :
1)Provides, under the Unfair Competition Law (UCL), that unfair
competition includes any unlawful, unfair, or fraudulent
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business act or practice, including any unfair, deceptive, or
untrue advertising, or any act prohibited by the False
Advertising Act (FAA). (Business & Professions Code Section
17200 et seq.)
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. (Business & Professions Code
Section 17500.)
FISCAL EFFECT : None
COMMENTS : This non-controversial bill is a response to reported
consumer complaints that certain businesses, especially those
offering magazine subscriptions or other potentially continuous
services, lure consumers into signing up for "automatic
renewals" without the consumer's full knowledge or consent.
This bill seeks to address this problem by requiring clear
disclosures and affirmative acts of consumer consent. The
author states:
It has become increasingly common for consumers to
complain about unwanted charges on their credit cards
for products or services that the consumer did not
explicitly request or know they were agreeing to.
Consumers report 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. The onus falls on the consumer to end these product
shipments and stop the unwanted charges to their credit
card.
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. were discovering that their
subscriptions were automatically renewed even though the
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consumers claimed that they had never knowingly consented to the
renewals. In 2006, the investigation resulted in a settlement
agreement between the Attorneys General and Time, Inc. that
requires Time Inc. to more clearly disclose renewal terms and
ensure that the consumer take some affirmative step to
acknowledge consent or rejection of 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, Inc. settlement.
Analysis Prepared by : Thomas Clark / JUD. / (916) 319-2334
FN: 0002290