Washington AG Asks Consumers About Auto-Renewing Subscription Services with Enforcement Actions Likely to Follow | Troutman pepper

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On October 10, Washington Attorney General Bob Ferguson issued a consumer alert, sharing a consumer survey that found 59% of Washington residents may have unwittingly signed up for subscription plans. The press release encouraged consumers to file complaints with the office of AG Ferguson (OAG). Coupled with past enforcement efforts, the announcement sends a clear message that the OAG is prepared to take additional enforcement action against companies marketing auto-renewal services that fail to comply with the law.

AG Ferguson hired a consulting firm to survey Washingtonians to better understand consumer experiences with recurring charges and hidden charges. The statistical data from this survey concluded that over the past four years:

  • 59% of consumers have unwittingly signed up for a subscription plan or service, recurring payment plan, or other auto-renewing plan that charged them when they thought they had made a one-time purchase.
  • 61% of consumers said they were charged a fee that they didn’t know would be applied until they were in the final stage of ordering a product or service.
  • 36% of consumers have been charged a fee they didn’t know would be applied until they purchased a product.

Involuntary sign-up due to auto-renewal plans spanned various industries and a variety of products and services, including online retailers (29%); magazine/newspaper/book subscriptions (23%); health or cosmetics (21%); video game services (21%); and delivery services (21%).

The survey also included a number of attitude statements in which the following percentages “completely agreed” with the following:

  • Companies should be required to clearly disclose all fees and costs at the time they sell a product (82%).
  • Companies should be required to clearly disclose all fees and costs when announcing the price of a product (80%).
  • Product charges should be disclosed using the same font size as the product price (64%).
  • A product’s price and fees should be listed in the same place (74%).

The OAG’s extension of its “Honest Fees” initiative to automatic renewals is a wake-up call to all companies marketing automatic renewal services

The survey was identified as part of Washington’s “Honest Fee’s Initiative,” which aims to ensure companies only charge legal fees and adequately disclose all fees and charges to Washington consumers. This initiative previously focused on cable companies and internet service providers who allegedly failed to disclose the fees, surcharges and terms or conditions of their offers to the consumer prior to the consumer’s purchase.

But Washington’s focus on automatic renewals expands the initiative and complements Washington AG’s track record of enforcement action against subscription services. For example, in 2020 the OAG reached a settlement of approximately $875,000 stoppage insurance with a national subscription company regarding allegations that the company failed to make it clear to consumers that their discounted subscription would automatically renew. The resolution required that the company (1) clearly and prominently disclose the terms of the automatic renewal offer; (2) send a reminder notice to consumers prior to any auto-renewal that clearly and prominently identifies the terms of the auto-renewal offer; and (3) include specific information in notice emails and letters/postcards informing the consumer that the notice is for their subscription renewal. In its ongoing efforts to regulate the market and auto-renewal services, AG Ferguson’s press release was blunt: “If you have unwittingly signed up for a subscription service, contact my office so we can assist you. “

Our opinion

It is clear that the OAG will take enforcement action if companies fail to comply with the law when marketing auto-renewal services. In addition, the OAG press release also follows the The FTC’s announcement last fall that it is also strengthening subscription services enforcement. Subscription services are now warned and must prepare by ensuring:

  • All material terms are clearly and conspicuously disclosed to the consumer in the subscription offer. This includes price, recurring charges, payment dates, fee changes, time limit for termination or cancellation, and all information necessary to cancel the contract.
  • Reminder notices are sent before all automatic renewals, with information that the notice is for their subscription renewal, and they can cancel before renewal.
  • There is a simple and easy way for the consumer to cancel the subscription, preferably using the same medium the consumer used to sign up for the plan.
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