New Automatic Renewal Law in Colorado to Take Effect on January 1, 2022
Colorado's new automatic renewal law, effective January 1, 2022, marks a significant overhaul of its previous statute. With this update, Colorado joins the ranks of states with robust regulations governing automatic renewal agreements. Businesses and marketers intending to offer subscription services or other forms of automatic renewal plans in Colorado must now adhere closely to these new legal requirements.
Automatic renewal agreements are contracts where paid subscriptions or purchasing arrangements renew automatically at the end of a defined term on a recurring basis. Under Colorado's updated law, renewal terms cannot exceed one year after the initial contract period unless consumers expressly agree to longer terms. Marketers are obligated to obtain consumers' explicit informed consent regarding the terms of automatic renewal offers.
The other Key requirements under the automatic renewal law include:
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Disclosures: Clear and conspicuous disclosures are paramount under the new law. Marketers must clearly outline several key details including the automatic renewal feature, the length of the renewal term, the cancellation policy, any recurring charges, and any minimum purchase obligations if applicable. Additionally, during trial periods, marketers must disclose the amount that will be charged and any subsequent obligations post-trial in a clear and conspicuous manner.
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Display of Disclosures: To ensure clarity, these disclosures must be presented prominently—such as in larger or contrasting fonts, or set off by symbols—particularly in audio disclosures where they must be delivered audibly and comprehensibly.
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Links: Marketers can utilize online links to direct consumers to detailed disclosures of automatic renewal terms. These links must be readily available before purchase, positioned adjacent to any purchase link, and clearly labeled to indicate that by making a purchase, consumers agree to enroll in an automatic renewal contract.
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Cancellation Mechanism: A straightforward cancellation mechanism is mandatory. Marketers must provide a simple, cost-effective, and easily accessible means to cancel automatic renewal contracts or trial offers. This might include a one-step online cancellation link available immediately or after completing a reasonable authentication process.
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Annual Reminders: Yearly reminders are also required. Marketers must notify consumers annually that their contract will renew unless canceled. These notices must include the cancellation process and accurate information about the marketer's identity. Notices can be sent via physical mail, email, or another accessible form of communication as authorized. As for the reminder timing marketers must: (a) send yearly notices 25-40 days before enrollment anniversary; and (b) for subscriptions with shorter renewal terms, notices must be sent 25-40 days before extension term.
Notably, Colorado's law applies broadly but excludes certain entities like those regulated by the Division of Insurance, licensed banks, bank holding companies, affiliated entities, licensed credit unions, and other financial institutions from its automatic renewal provisions.
In essence, Colorado's updated automatic renewal law imposes stringent requirements on businesses and marketers, aiming to enhance transparency and consumer protection in subscription-based transactions within the state.
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This article is for information purposes only. It is not intended to be and should not be relied on as legal advice for any particular matter.