BILL NUMBER: S5941

SPONSOR: KAVANAGH
 
TITLE OF BILL:

An act to amend the general business law, in relation to requiring busi-
nesses to notify consumers of an upcoming automatic renewal or contin-
uous service charge thirty days prior to such charge

 
PURPOSE OF BILL:

To require businesses to notify consumers of an upcoming automatic
renewal or continuous service charge fifteen to thirty days prior to
such charge on the consumer's account.

 
SUMMARY OF PROVISIONS:

Section one of the bill amends section 527-a of the general business law
to require all businesses to notify consumers of an upcoming automatic
renewal or continuous service charge to the consumer's account fifteen
to thirty days prior to such renewal or charge. The notice shall either
include instructions on how to cancel such renewal or charge containing
              

a model termination email with which the consumer can notify the busi-
ness of its subscription cancellation or send an email that contains a
link to a website where the consumer can terminate the renewal or
charge.

Section two sets forth the effective date.

 
JUSTIFICATION:

Most New Yorkers pay for at least one service through a subscription
model. Subscription services have become more common in recent years,
but as millions of Americans stayed home during the pandemic, they
turned to digital entertainment and signed up for recurring meal deliv-
ery services, exercise and diet programs, and monthly clothing
subscriptions. This gave many more businesses an incentive to shift to a
subscription model that can be paid for and accessed online.

Most Americans are no longer sheltering in place, but the popularity of
these subscription services has continued to grow. The Washington Post
reports that the "subscription economy" will grow to $1.5 trillion by
2025, more than doubling in scale since 2021.* Many Americans do not
even realize just how much they are spending on subscription services.
CNBC news reports that close to a third of consumers underestimate how
much they are spending on subscriptions by $100 to $200 dollars every
month. The same report explains that 42% of people did not realize they
are still paying for a subscription they no longer use.**

While many of these services are convenient and accessible, many busi-
nesses have adopted deceptive subscription marketing practices that make
it very easy to sign up but far more difficult to cancel.  In addition,
users often unknowingly sign-up or agree to automatic renewals, meaning
the company will automatically change a user's account when their
contract ends so that the user is then locked in for another year of
service.

Recently, complaints around this issue have grown substantially. Just
last year, the Federal Trade Commission (FTC) announced its intention to
crack down on these deceptive marketing practices -- winning a $10
million settlement from a children's education company that unfairly
billed users and made it difficult for them to cancel the service.  Over
200,000 Americans are receiving refunds as a result of the settlement,
demonstrating just how common this issue is.

This bill would require a business to notify a consumer of an upcoming
automatic renewal or continuous service charge 15 to 30 days prior to
such charge on a customer's account. The notice must include
instructions on how to cancel their subscription. This legislation will
ensure transparency from subscription service companies and help protect
New Yorkers from deceptive marketing practices that these companies
often utilize.

 
LEGISLATIVE HISTORY:

This is a new bill.

 
FISCAL IMPLICATIONS:

None to the state.

 
EFFECTIVE DATE:
This act shall take effect immediately.
*
www.washingtonpost.com/
business/2021/06/02/automatic-renewals-ftc-subscriptions/
**
www.cnbc.com/2022/06/02/consumers-
spend-133-more-monthly-onsubscriptionsthan-they-realize.html

                                 
BILL NUMBER: S5941A

SPONSOR: KAVANAGH
 
TITLE OF BILL:

An act to amend the general business law, in relation to requiring busi-
nesses to notify consumers of an upcoming automatic renewal or contin-
uous service charge thirty days prior to such charge

 
PURPOSE OF BILL:

To require businesses to notify consumers of an upcoming automatic
renewal or continuous service charge fifteen to thirty days prior to
such charge on the consumer's account.

 
SUMMARY OF PROVISIONS:

Section one of the bill amends section 527-a of the general business law
to require all businesses to notify consumers of an upcoming automatic
renewal or continuous service charge to the consumer's account fifteen
to thirty days prior to such renewal or charge. The notice shall either
include instructions on how to cancel such renewal or charge containing
              

a model termination email with which the consumer can notify the busi-
ness of its subscription cancellation or send an email that contains a
link to a website where the consumer can terminate the renewal or
charge. Furthermore, this section shall not apply to any business,
subsidiary or affiliate thereof, regulated by the public service commis-
sion or the federal communications commission.

Section two sets forth the effective date.

 
JUSTIFICATION:

Most New Yorkers pay for at least one service through a subscription
model. Subscription services have become more common in recent years,
but as millions of Americans stayed home during the pandemic, they
turned to digital entertainment and signed up for recurring meal deliv-
ery services, exercise and diet programs, and monthly clothing
subscriptions. This gave many more businesses an incentive to shift to a
subscription model that can be paid for and accessed online.

Most Americans are no longer sheltering in place, but the popularity of
these subscription services has continued to grow. The Washington Post
reports that the "subscription economy" will grow to $1.5 trillion by
2025, more than doubling in scale since 2021.* Many Americans do not
even realize just how much they are spending on subscription services.
CNBC news reports that close to a third of consumers underestimate how
much they are spending on subscriptions by $100 to $200 dollars every
month. The same report explains that 42% of people did not realize they
are still paying for a subscription they no longer use.**

While many of these services are convenient and accessible, many busi-
nesses have adopted deceptive subscription marketing practices that make
it very easy to sign up but far more difficult to cancel.  In addition,
users often unknowingly sign-up or agree to automatic renewals, meaning
the company will automatically change a user's account when their
contract ends so that the user is then locked in for another year of
service.

Recently, complaints around this issue have grown substantially. Just
last year, the Federal Trade Commission (FTC) announced its intention to
crack down on these deceptive marketing practices -- winning a $10
million settlement from a children's education company that unfairly
billed users and made it difficult for them to cancel the service.  Over
200,000 Americans are receiving refunds as a result of the settlement,
demonstrating just how common this issue is.

This bill would require a business to notify a consumer of an upcoming
automatic renewal or continuous service charge 15 to 30 days prior to
such charge on a customer's account. The notice must include
instructions on how to cancel their subscription. This legislation will
ensure transparency from subscription service companies and help protect
New Yorkers from deceptive marketing practices that these companies
often utilize.

 
LEGISLATIVE HISTORY:

This is a new bill.

 
FISCAL IMPLICATIONS:

None to the state.

 
EFFECTIVE DATE:
This act shall take effect immediately.  *
www.washingtonpost.com/business/2021/06/02/automatic- renewals-ftc-sub-
scriptions/
** www.cnbc.com/2022/06/02/consumers-spend-
133-more-monthly-onsubscriptionsthan-they-realize.html