On October 10, Washington Attorney General Bob Ferguson issued a consumer alert, sharing a consumer survey that revealed 59% of Washingtonians may have unintentionally enrolled in subscription plans. The press release encouraged consumers to file complaints with AG Ferguson’s office (OAG). Coupled with past enforcement efforts, the announcement sends a clear message that the OAG is prepared to take additional enforcement actions against companies marketing auto-renewal services that do not comply with the law.
AG Ferguson engaged a consulting firm to survey Washingtonians to better understand consumer experiences with recurring charges and hidden fees. The statistical data from this survey concluded that over the past four years:
- 59% of consumers unintentionally enrolled in a subscription plan or service, recurring payment plan, or other automatically renewing plan that billed them when they thought they made a one-time purchase.
- 61% of consumers stated they were charged a fee that they did not know would be applied until they were in the final stage of ordering a product or service.
- 36% of consumers had been charged a fee they did not know would be applied until after they had purchased a product.
The unintentional enrollment due to auto-renewal plans spanned across various industries and a variety of products and services, including online retailers (29%); magazine/newspaper/book subscriptions (23%); health or cosmetics (21%); video game services (21%); and delivery services (21%).
The survey also included a number of attitudinal statements whereby the following percentages “completely agreed” with the following:
- Companies should be required to clearly disclose all fees and costs at the time they sell a product (82%).
- Companies should be required to clearly disclose all fees and costs when advertising a product’s price (80%).
- A product’s fees should be disclosed using the same size font as the product’s price (64%).
- A product’s price and fees should be listed in the same location (74%).
The OAG’s Extension of Its “Honest Fee’s Initiative” to Automatic Renewals Is a Warning to All Companies Marketing Auto-Renewal Services
The survey was identified as part of Washington’s “Honest Fee’s Initiative,” which intends to ensure that companies only charge lawful fees and that they adequately disclose all fees and charges to Washington consumers. This initiative previously focused on cable and internet services providers that allegedly failed to disclose fees, surcharges, and terms or conditions of their offers to the consumer prior to the consumer’s purchase.
But Washington’s focus on automatic renewals expands the initiative and supplements the Washington AG’s track record of enforcement actions against subscription services. For example, in 2020, the OAG entered into an estimated $875,000 assurance of discontinuance with a national subscription company related to allegations that the company did not clearly disclose to consumers that their discounted subscription would automatically renew. The resolution required the company to (1) clearly and conspicuously disclose the automatic renewal offer terms; (2) send a reminder notice to consumers in advance of any automatic renewal that clearly and conspicuously identifies the automatic renewal offer terms; and (3) include specific information in the advance notice emails and letters/postcards that informs the consumer the notice is about the renewal of their subscription. In his ongoing effort to regulate the marketplace and auto-renewal services, AG Ferguson’s press release was blunt: “If you unintentionally signed up for a subscription service, contact my office so we can help.”
It is apparent that enforcement action by the OAG will follow if companies fail to comply with the law when marketing auto-renewal services. In addition, the OAG’s press release also follows the FTC’s announcement last fall that it is also ramping up enforcement on subscription services. Subscriptions services are now on notice and should prepare by ensuring:
- All material terms are clearly and conspicuously disclosed to the consumer in the subscription offer. This includes the price, recurring charges, payment dates, changes to the charges, deadline to stop or cancel, and all information necessary to cancel the contract.
- Reminder notices are sent in advance of all automatic renewals, earmarked with information that the notice is about the renewal of their subscription, and they may cancel prior to renewal.
- There is a simple and easy way for the consumer to cancel the subscription, preferably using the same media that the consumer used to enroll in the plan.