In a significant move to strengthen consumer protections, Governor Gavin Newsom has signed AB 2863 into law. The bill introduces stringent requirements for subscription-based services, ensuring consumers can easily cancel subscriptions online and receive annual reminders about their ongoing charges.

On Sept 24, 2024, Governor Newsom approved AB 2863, marking California as a leader in regulating automatic subscription renewals and cancellations. This legislation addresses long-standing consumer frustrations with complicated and deceptive cancellation processes, making it easier for Californians to manage their subscriptions.

Key Provisions of AB 2863

1. One-Click Cancellation: Businesses offering auto-renewal or continuous service contracts must now provide a clear, prominently displayed option to cancel subscriptions online, matching the ease with which consumers originally signed up.

2. Annual Renewal Reminders: Companies must send annual reminders to subscribers, detailing the cost, terms, and cancellation process, ensuring consumers are aware of their ongoing commitments and any changes.

3. Express Consent for Renewals: The bill requires businesses to obtain “express affirmative consent” from consumers before enrolling them in subscriptions, including free-to-paid conversions.

Implementation Timeline

The law will take effect on July 1, 2025, giving subscription businesses time to adjust their processes and ensure compliance.

Background and Broader Legislative Context

AB 2863 is part of a broader consumer protection package signed by Governor Newsom, which also addresses medical debt relief and unfair banking practices. These additional measures aim to alleviate financial burdens on Californians, particularly those disproportionately impacted by hidden fees and debt.

INSIDER TAKE: 

For subscription-based companies, AB 2863 represents a significant shift toward consumer empowerment:

– Adaptation Required: Businesses will need to revisit their subscription management systems, cancellation processes, and consent practices to align with the new law’s requirements.

– Building Consumer Trust: Companies that proactively embrace these changes can leverage them to build stronger relationships with their customers, reducing potential churn by demonstrating a commitment to transparency and fairness.

– Prepare for Wider Adoption: Given the similarities between AB 2863 and proposed federal regulations, subscription businesses should anticipate similar laws in other states or at the national level, making early adaptation a smart move.

The signing of AB 2863 sets a new standard for subscription services, making it clear that California is leading the charge in protecting consumers. With implementation set for July 2025, businesses should act now to ensure compliance and seize the opportunity to establish themselves as transparent, customer-focused leaders in the subscription economy.