On July 1, 2019, a new law passed by the State of Vermont goes into effect, which is the most stringent of its kind. The law, entitled "Automatic Renewal Provisions in Consumer Contracts," governs contracts between a consumer and a seller (or a lessor) with an initial term of one year or longer that renews for a subsequent term that is longer than one month. Any such contract may not automatically renew unless the seller (or lessor) satisfies several requirements set forth in the new auto-renewal law.
What Obligations do Sellers and Lessors have under Vermont's Auto-Renewal Law?
Most notably, Vermont's new auto-renewal law has a double opt-in requirement – the first such requirement of its kind in the country. The first required opt-in occurs when the initial contract is accepted: the offer must "clearly and conspicuously" communicate the terms of the automatic renewal provision in plain language, in bold-face type. Notwithstanding the first opt-in, namely accepting the contract containing the automatic renewal provision, the consumer must also take separate "affirmative action" to opt in to the automatic renewal provision itself (namely, the second opt-in).
In addition to the foregoing double opt-in requirements, Vermont's auto-renewal law requires sellers (and lessors) to provide written or electronic notice to consumers between thirty and sixty days before the applicable automatic renewal date, the termination date of the contract, or the date by which the consumer must provide notice of cancellation, whichever is earliest. This provides the consumer with the opportunity to opt-out, that is, to terminate the contract before the automatic renewal occurs. Please note that the auto-renewal law does not apply to contracts with financial institutions, credit unions or contracts for insurance. However, the definition of consumer does include businesses in addition to individuals, such that business-to-business contracts are within its strictures.
With respect to existing auto-renewal contracts in effect as of July 1, 2019 (the effective date of the auto-renewal law), they may not automatically renew in accordance with their terms unless sellers (lessors) provide to consumers the same advanced notice between thirty and sixty days before the automatic renewal date, the contract termination date, or the notice of cancellation date, whichever is earliest.
We have previously blogged about Vermont's recent Data Broker Law, the first in the country to impose a regulatory scheme for data brokers, who collect data points on consumers and sell that information to service providers. Continuing its trend in favor of enacting exacting consumer protection laws, Vermont now joins a growing number of states that have enacted laws governing auto-renewal offers.
Auto-Renewal Laws – Proceed with Caution
We have also blogged about consumer protection laws, consumer class action suits, and various regulatory matters affecting this sector. Other states may soon follow Vermont in enacting more stringent laws governing consumer contracts. Companies should be made aware of the new state and federal laws regulating such sectors. As such, it is recommended that companies retain qualified legal counsel to help navigate the statutory and regulatory schemes and emerging issues presented by applicable state and federal law.
Related Blog Posts:
California Strengthens its Automatic Renewal Law
New Jersey's Consumer Fraud Act
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