Vermont Passes Strictest Subscription Renewal Law

July 24, 2018

Companies that offer subscriptions that renew automatically now have to pay attention to tiny Vermont, which just passed the strictest automatic renewal law in the country. Several states, including California, have laws governing subscription renewals that require sellers to clearly and conspicuously present the terms of the offer, get express consent from the consumer, provide an easy method to cancel, and send a reminder prior to the start of a renewal term. Vermont’s law adds two new twists, however. First, the auto-renewal provision must be presented in boldface type. Second, consumers have to take two actions to accept the renewal offer.

California, which prior to passage of the Vermont law had perhaps the most restrictive law on the subject, gives companies a great deal of latitude in deciding how to meet the “clear and conspicuous” standard – it can be boldface, larger type face than surrounding text, contrasting color or font, or text that is set off by surrounding text by symbols or other marks. Vermont’s law will give no such latitude. If the renewal plan text is larger font, contrasting color, and surrounded by symbols, but is not in boldface, it will not comply.

The two-action consent requirement means that in both online and written offers, the company must get a consumer’s consent through both:

  1. A check box, signature, or other similar method that shows consent specifically to the auto-renewal terms, and
  2. A separate consent (like a “Submit” or “Purchase Now” button) to the overall order.

The Vermont law covers both business-to-consumer and business-to-business subscriptions, although there is an exemption for insurance contracts and contracts between a consumer and a financial institution or credit union. By including B2B, the Vermont law goes well beyond California’s law, which only protects consumers. This means a wide variety of SaaS businesses need to look at their subscription and renewal practices, if they are doing business with Vermont companies.

Vermont’s new law will take effect on July 1, 2019, and only applies to contracts with an initial term of one year or more, and subsequent terms that are longer than one month. So, if a company offers a product or service with an initial term of less than a year, and the term renews on a monthly, quarterly, or semi-annual basis, the company is not covered. Similarly, companies that offer simple monthly subscriptions, like many streaming services and subscription boxes, are not covered. Many magazine subscriptions have an initial term of one year, and typically renew for terms of a year, so these most likely will be covered by the new law.

 

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