North Dakota has passed House Bill 1195 (the “Law”) to regulate automatic renewal agreements. Agreements entered into after July 31, 2019, containing automatic renewal clauses for the sale of goods or services, must comply with the new restrictions contained in the automatic renewal Law.
How do sellers comply with the Law?
Automatic Renewal Agreements
The Law defines an “automatic renewal” as “a paid subscription or purchasing agreement [that] is automatically renewed for a period of more than one month at the end of a definite period for a subsequent period.” When presenting automatic renewal agreements to consumers, the Law mandates that merchandise companies: 1) present the terms in a clear and conspicuous manner; 2) provide acknowledgement of the automatic renewal offer; and 3) inform consumers on how to cancel the automatic renewal subscription or agreement through a cost-effective, timely, and simple procedure. If the automatic renewal period binds the consumer for more than six months, towards the end of the initial term, sellers are required to provide the consumer with a clear and conspicuous written notice that she/he can cancel the contract and avoid triggering the automatic renewal. Additionally, automatic renewal periods may not exceed twelve months.
Enforcement of the Automatic Renewal Law
Merchandise vendors must comply with the terms of the Law because, among other reasons, a failure to do so will render such contracts unenforceable and void. The Law provides both the Attorney General and aggrieved consumers with the ability to bring action against offending sellers. In a private right of action, the court may award the plaintiff costs, expenses, and reasonable attorney’s fees.
In addition to North Dakota, sellers should be aware of automatic renewal laws in other jurisdictions, including those of California, Vermont and Washington D.C., as well as the Federal Restore Online Shoppers’ Confidence Act. Companies that use automatic renewal agreements should consult with experienced counsel to ensure that they comply with state and federal automatic renewal laws.