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Lawsuits claim automatic renewal charges are consumer fraud

A consumer problem exists in California and elsewhere over a questionable practice of websites that automatically charge a customer’s card for renewing a subscription to a service at the expiration of the membership period. It may be included somewhere in the fine print of the company’s terms and conditions that a service will automatically renew at the end of the term and the credit card charged appropriately. Nonetheless, that is not transparent enough for most consumers, and the practice has fueled the initiation of consumer fraud class actions against many automatic renewal practices.

The cases are being filed in a wide variety of contexts, and California has passed an automatic-renewal law to further specify situations that are considered unacceptable and anti-consumer in nature. The California law and others around the nation provide the consumer a certain level of protection. It is illegal for a company to use automatic renewal procedures without first obtaining express consent from a customer prior to charging the customer’s credit card.

Cases were filed in California against Spotify, Hulu, Dropbox, LifeLock and several other companies using aggressive renewal policies. All revenues collected by the company must be returned to customers under the demands of most of these lawsuits. Some of the class actions have been dismissed due to arbitration provisions in the company’s terms and conditions; these were sent to private arbitration pursuant to the terms and conditions.

The case against LifeLock was settled and court-approved in July 2015. All such cases seek to certify a class of customers who were charged automatically for renewals in violation of state laws and on the basis of consumer fraud allegations. The California ARL requires the company to disclose the automatic renewal terms and to obtain express consent from a customer before a charge can be made. It seems like a small sacrifice for a company to simply send specific notice requesting approval each time a subscription is about to expire. However, many companies have taken in tens of millions in renewal fees without providing disclosure, and they may turn out to be reluctant followers of the new laws being passed.

Source: computerworld.com, “Websites’ automatic renewal policies can lead to trouble“, Joshua Briones, Crystal Lopez and Lauren Miller, March 11, 2016