In this post, I’m going to go over a law that, as best I can tell, is unique to California. If I’m wrong and you have a similar law in your state or country, drop me a comment. The California law in questions is section 17602 of the California Business and Professions Code. As it is a California law, it only applies to California consumers. However, if I run a business and have to invest (e.g. buy new software, etc) to comply with section 17602 for my California-based customers, I see no reason not to apply section 17602 to my customers who aren’t in California also (as long, of course, as it benefits my business in some way). My marginal cost of doing so is basically zero.
Section 17602 applies to transactions where consumers purchase a subscription to something, such as a magazine or a monthly-box service (e.g. each month you receive a new box of a certain category of item, such as men’s clothing, pet treats, etc). These subscriptions often are recurring on a monthly or year basis. The consumer — at least in theory — has the option to cancel their subscription at the end of each monthly or yearly-term.
How it often works out, though, is that the consumer ends up being charged for things they weren’t expecting. This might be the consumer’s fault because they, for instance, forgot to cancel their subscription in a timely manner and ended up getting charged for another year. Or it could be because the company is unscrupulous and decided to ignore the consumer’s timely request to cancel their subscription. This isn’t limited only to subscriptions either. Many companies offer free trials for their products or services, but say in the fine print that, unless cancelled at the end of the free trial, the consumer will be charged an ongoing monthly fee.
This difference — regardless of it’s environment or cause — between what actually happens and what consumer expectation is why section 17602 came about. The actual text of 17602 is a bit long, but here’s a link to it. Please do take a look at the actual text because I’m only going to paraphrase it. Effective July 1, 2018, Section 17602 mandates those conducting business in California must do the following:
- Not sign a customer up for an automatically-renewing subscription, free trial, etc unless the terms are first provided to the consumer in a clear and conspicuous way;
- Not charge the consumer for an automatically-renewing subscription, free trial, etc unless the consumer first consents to the charge and also the terms governing the purchase itself;
- Provide the consumer a record that they can retain which describes what they purchased, the applicable terms, and directions on how to cancel their subscription or free trial.
- The record provided to the consumer also has to provide a “cost-effective, timely, and easy-to-use mechanism” such as a toll-free number, email address, or mailing address, by which the consumer can cancel their subscription or free trial.
- If the consumer accepted the subscription or free trial entirely online, then the business must allow the consumer to cancel their subscription or free trial entirely online also. In other words, the business cannot require the cancellation be done partially online and the remainder on the phone or in a store or branch. This is Section 17602(c) and is where the title of this post comes from.
- Lastly, if the terms of the subscription or free trial change in some material way after the consumer has already begun their subscription or free trial, the business must notify the consumer of the material change and provide the consumer the option to cancel their subscription or free trial.
Again, please do read the precise text of section 17602 of California’s Business and Professions Code because the above is just my paraphrase of the actual text.
Suppose a company fails to comply with section 17602 in some way and further suppose that you can prove it. What then? The answer is at least partially in section 17603 and section 17604 of California’s Business and Professions Code.
Section 17604 first. It provides:
“(a) Notwithstanding Section 17534, a violation of this article shall not be a crime. However, all available civil remedies that apply to a violation of this article may be employed.
(b) If a business complies with the provisions of this article in good faith, it shall not be subject to civil remedies.“
Section 17534 of the Business and Professions Code states the following, but violating section 17602 is, nonetheless, not a crime:
“Any person, firm, corporation, partnership or association or any employee or agent thereof who violates this chapter is guilty of a misdemeanor.”
In other words, violating section 17602 can subject the business to a civil lawsuit, but the business might be able to defend it self by proving that it was complying in good faith.
I suspect section 17603 will be the more common remedy for most consumers. Section 17603 states:
“In any case in which a business sends any goods, wares, merchandise, or products to a consumer, under a continuous service agreement or automatic renewal of a purchase, without first obtaining the consumer’s affirmative consent as described in Section 17602, the goods, wares, merchandise, or products shall for all purposes be deemed an unconditional gift to the consumer, who may use or dispose of the same in any manner he or she sees fit without any obligation whatsoever on the consumer’s part to the business, including, but not limited to, bearing the cost of, or responsibility for, shipping any goods, wares, merchandise, or products to the business.”
In other words, if a business sends merchandise or products to a consumer as part of a recurring agreement (e.g. a subscription) and doesn’t get the consumer’s consent first as section 17602 requires, the items the consumer receives are a gift that the consumer need not return or pay for. In other words, the business fails to comply with section 17602 at their own peril.
Lastly, I’ll mention that certain businesses and entities are exempt from section 17602. This is described in section 17605 of the Business and Professions Code which states:
(a) Any service provided by a business or its affiliate where either the business or its affiliate is doing business pursuant to a franchise issued by a political subdivision of the state or a license, franchise, certificate, or other authorization issued by the California Public Utilities Commission (CPUC).
(b) Any service provided by a business or its affiliate where either the business or its affiliate is regulated by the CPUC, the Federal Communications Commission, or the Federal Energy Regulatory Commission.
(c) Any entity regulated by the Department of Insurance.
(d) Alarm company operators, as defined in Section 7590.2, and regulated pursuant to Chapter 11.6 (commencing with Section 7590) of Division 3.
(e) A bank, bank holding company, or the subsidiary or affiliate of either, or a credit union or other financial institution, licensed under state or federal law.
(f) Service contract sellers and service contract administrators regulated by the Bureau of Electronic and Appliance Repair pursuant to Article 4.5 (commencing with Section 9855) of Chapter 20 of Division 3.
Hopefully, these six exceptions to section 17602 only cover a small, small minority of businesses and entities out there.
As always, I hope this post was helpful. As I’ve mentioned already, please do read the actual text of section 17602 which I have linked liberally in this post (including right >>here<<). I have only paraphrased what section 17602 says. If you are going to rely on this post, please do check all of the legal authority that I’ve cited because it’s entirely possible they might have changed in the time between when I wrote this post and when you’re reading it. Lastly, if you do have a case involving section 17602, please do find a lawyer in your area with whom you can discuss your situation in person.
Andy Chen
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