The scenario is all too familiar to thousands of District residents: while looking over a credit card bill, you notice a mysterious charge from a company or service you vaguely remember doing business with a year ago. Why do you keep getting charged for a cleaning service you only used once? If this sounds familiar, chances are that you are the unwitting victim of an automatic renewal clause.
These sneaky clauses typically state that unless you notify the company, your contract will automatically renew at the end of the term. Unsurprisingly, many companies love these clauses as it provides them with guaranteed income. Since consumers are often forced to go through the arduous process to cancel their subscriptions, even consumers who want out of these contracts can find it difficult to extricate themselves.
Not all automatic renewal contracts are wrong, however. For example, I am grateful that I do not have to write a check or pay an online bill each month just to keep using Netflix. However, many companies slip these automatic renewal clauses into the fine print and consumers do not know they have to cancel by a certain date (often as much as 3 months prior to the contract’s end date) to avoid being stuck with another year of service. This leaves consumers and businesses alike saddled with expensive contracts they have no desire to utilize and have no ability to cancel.
Fortunately, 22 states have laws on the books which require that automatic renewal clauses not be buried in pages of fine print. While the District does not yet have this consumer protection, Councilmembers Mary Cheh, David Grosso, and Anita Bonds recently introduced the Consumer Disclosure Act of 2017 which is currently pending before the Committee on Judiciary and Public Safety. This legislation would empower consumers by requiring businesses to provide notice to consumers if their contract is set to renew for a multi-month term. This reminder will need to include clear instructions on how and when consumers must cancel to prevent an automatic renewal of a contract.
The Consumer Disclosure Act of 2017 would not only protect consumers from unscrupulous business practices, but it would also help the District’s businesses and employers. For instance, my employer — the National Consumers League — recently found out that we were on the hook for a contract which automatically renewed for the year at the tune of $23,000. We were responsible for this large sum merely because we failed to provide a written notice of our intention to cancel the contract more than 90 days prior to the contract’s end. The person originally arranging for this service was no longer on staff and management wasn’t aware of the contract’s automatic renewal provisions. Had the Consumer Disclosure Act been law, not only would we have known before signing the contract that there was an automatic renewal clause, we would have received a notice prior to the contract’s 90-day cancellation window reminding us that we need to make a decision to cancel or renegotiate the contract.
Research suggests that the consumers has around 11 recurring charges. To help deal with this headache and avoid expensive surprises, we urge the DC Council to act quickly on this bill and begin giving residents in DC the protections from automatic renewal abuses that citizens in other states already enjoy.