California Law Puts Clamp on Deceptive Auto-Rebills

LOS ANGELES — A new California law that went into effect on Sunday makes it unlawful for businesses to make automatic renewal offers that are deceptive.

Approved last year, California's SB 313 covers “any business that makes an automatic renewal or continuous service offer to a consumer in the state.”

Consumers in other states, as a consequence of the law taking effect, will likely benefit from the statute, which provides for civil remedies.

With the new law, businesses must state in their offers “a clear and conspicuous explanation of the price that will be charged after the trial ends or the manner in which the subscription or purchasing agreement pricing will change upon conclusion of the trial.”

“[It] would prohibit a business from charging a consumer's credit or debit card, or the consumer's account with a third party, for an automatic renewal or continuous service that is made at a promotional or discounted price for a limited period of time without first obtaining the consumer's consent to the agreement,” according to the new California law.

“[It] would also specify that if the automatic service offer or continuous service offer includes a free gift or trial, the business is required to disclose how to cancel, and allow the consumer to cancel, the automatic renewal or continuous service before the consumer pays for the goods or services.

“The bill also would require a consumer who accepts an automatic renewal offer or continuous service offer online to be allowed to terminate the automatic renewal or continuous service exclusively, as specified. The bill would also make other clarifying and nonsubstantive changes.”

Industry attorney Marc Randazza told XBIZ that most of the businesses he’s observed in the online adult entertainment biz will likely have no issues with the new law.

“However, there are a few that make quite a good living by ripping off customers with auto-rebills,” Randazza said. “The scrupulous operators have little to fear. But, those who are not will likely find that this costs them a significant amount of money. 

“I don't feel badly for them, because if you make a lot of money essentially stealing from your customers, you have little right to complain when the gravy train hits a speed bump.”