by Larry Magid
This post first appeared in the Mercury News
Listen to “New law makes it easier to cancel online subscriptions”
Listen to Larry Magid and Assemblyman Marc Berman discuss new law (1-minute)
Even though this is a California law, it is likely to impact consumers nationwide. Because California is such a big state, U.S. companies are likely to change their policies for everyone.
I’m not a cheapskate, but I don’t like to throw-away money, and I’m embarrassed to admit, that’s exactly what I’ve done on several occasions, when I’ve failed to cancel a service that I don’t use.
Sometimes it’s because I sign-up for something that I think I’m going to love and just stop using it. Sometimes it’s due to forgetfulness. I sign-up for a trial subscription and forget to cancel on time. In other cases, it’s because it was too much of a hassle. I tried to cancel via the company’s app or website and couldn’t find a way to do so or I called the company and was put on extended hold.
A few times, when I finally got through, I was told I had to speak to another person in charge of canceling which means being on hold again, or worse, being told I had to call back because that office isn’t open right now. That department’s job, if you ever wind up reaching them, is usually to try to convince you not to cancel by making you an offer you can’t refuse, which might be OK if you actually want the service, but by the time I make the call, I’m pretty sure I don’t want it.
Subscriptions are a big business, and a survey from consulting firm WestMonroe found that most people underestimate how much they spend by a lot. When asked, the average first guess was $79.74 a month but the actual average was $237.33.
I’m sure I too would have been way off had I been part of that survey. Sometimes I don’t realize that I’m being charged for something until I see it on my credit card statement, and by that time, it may be too late to cancel until the subscription expires, typically in about a year. And that assumes that I notice the charge on my statement. It’s infuriating, and there ought to be a law.
The law is now on our side
Well, there is a law thanks to California Assemblyman Marc Berman, who represents parts of Silicon Valley, including Palo Alto, Mountain View, Sunnyvale, and Half Moon Bay.
Berman is the author of Assembly Bill 390, which, says his website “allows consumers to cancel subscriptions online without hassle.” The law, which was signed this week by Governor Gavin Newsom and goes into effect in June 2022, would make canceling an online subscription “as easy as signing up online.” And that’s a good thing, because I’ve never been put on hold or told to call back to sign-up for an online offer.
The law would require companies to notify you before a free trial offer turns into a paid subscription and “any notice sent electronically would have to include a link to the cancellation page and require the business to allow a consumer to terminate the automatic renewal or continuous service offer at will, and without engaging any further steps that obstruct or delay,” according to the legislative summary. Also, says the law, “a consumer who accepts an automatic renewal or continuous service offer online shall be allowed to terminate the automatic renewal or continuous service exclusively online.” No more annoying phone calls.
In an interview, Berman told me that many of his colleagues, from both parties, didn’t need a lot of convincing because of their own experiences. “My Republican colleagues who philosophically might be inclined to support the businesses or free marketplace say, ‘I got hoodwinked by this also,’ or ‘I had to spend an hour on the phone waiting to cancel something.'”
The law’s two functions address a couple of my pet peeves — being able to cancel a subscription without having to jump through hoops and being notified before a trail subscription turns into a paid subscription. I have been caught by this a few times and now make it a practice to put a notice on my e-calendar to remind me before a free-trial ends.
It does not get you out of an agreement. If you sign-up for a one-year subscription you’re still on the hook if you didn’t cancel before the trial period ended. However there’s no harm in trying — some companies will allow you to cancel mid-contract if you ask.
The law protects California residents regardless of where the site or service is based, though enforcement for services located outside the United States might be difficult. Because California is such a big market, most companies will likely apply these policies in all 50 states, which is easier than creating a separate policy for California companies.
Good for businesses
While some might consider this pro-consumer law anti-business, I think it’s good for legitimate subscription businesses because it gives consumers more confidence that they won’t accidentally wind up paying for something they don’t need. As Berman said, “If you’re proving a service that people are using, all power too you. But as soon as people decide they want to stop using your service they should be free to do so.” Tricking people into paying for something they don’t want, Berman said, “shouldn’t be a business model.”