You subscribe to a magazine or join a gym for a special rate and months later realize you're paying a lot more for renewals. And those fees keep hitting your bank account while you try to figure out how to make it stop.
"This is the kind of classic, everyday scam that drives people nuts because we've all had this experience," says Richard Holober, executive director of the Consumer Federation of California.
His nonprofit is trying to make it easier to put an end to these scenarios. It's the main sponsor of a bill, SB 313, that was passed by the California Senate on April 19 with a bipartisan, 34-4 vote. Authored by Sen. Bob Hertzberg of Van Nuys, the legislation would require specific authorization from the consumer for deals involving "automatic service renewal," according to the Democrat's office. This could eliminate situations where you give up your credit card number for a product or service, only to be surprised when the statement comes and you also somehow opted into an automatically renewing subscription, Holober says.
The law would also require three to seven days' notice when a company is about to hit up your account for a renewal — and it says those firms must make it as easy to stop that process as it was to sign up in the first place.
"Consumers need to know what they are buying and under what terms, and what they need to do to cancel the arrangement," Herzberg said in a statement. "This legislation requires transparency."
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Holober says gym memberships and periodicals subscriptions generate the most complaints about automatic renewals. But lately cosmetics companies, content streamers, credit monitoring enterprises and online dating sites have gotten in on the act, he says. Hulu, Dropbox, Proactiv and Spotify have been targeted by class-action lawsuits over automatic renewals, according to the consumer group.
In one complaint filed with his nonprofit, Holober says, a consumer who was baited into signing up for a free sample (which required a credit card to cover shipping and handling) was surprised by a follow-up $179 charge for an ongoing subscription to something "that wasn't that good and that they certainly didn't want."
"It's basic that a business should be proud of its product as a good value instead of baiting you in," he says.
The legislation, opposed by direct marketers, multiple Silicon Valley lobbying groups and the California Newspaper Publishers Association, among others, now heads to the Assembly. If that body can pass it and Gov. Jerry Brown signs it, it would take effect Jan. 1 — which is a natural time of renewal.