In a growing effort to regulate subscription services and purportedly hidden or misleading fees (referred to as “junk fees”), late last year, the Massachusetts Attorney General proposed and held a public hearing on a set of impactful regulations (“MA Regulations”). On the auto-renewal front, the MA Regulations would impose requirements that go beyond the current patchwork of state and federal requirements in relation to point of sale disclosures, renewal notices, and cancellation methods. As for junk fees—which the AG Office considers to be “hidden or surprise fees above the advertised price of a good or service,” sometimes termed convenience or service fees—Massachusetts would join California and a series of federal regulators in seeking to increase transparency around these fees by requiring disclosure of the fee amounts, whether they are optional, and what costs they cover.
Auto-Renewing Subscriptions and Trial Offers
Notably, the proposed MA Regulations point-of-sale disclosure obligations only apply to subscriptions beginning with a free trial or promotional/discount rate period. But where a business offers such a trial period, they must clearly and conspicuously disclose a number of details (which may go beyond businesses’ typical disclosures built to comply with the current patchwork of laws):
- All financial obligations that may be incurred;
- All subscriptions or services the consumer will receive for which they will incur a financial obligation;
- Instructions on how to cancel and the deadline for cancellation; and
- The calendar date that the consumer will incur any additional financial obligation if they do not cancel.
The proposed MA Regulations would also require businesses to send renewal notices 5-10 days prior to all renewals for subscriptions where any term is more than 30 days. As written, this requirement seems to apply to all renewals of a subscription in which any term—whether the initial term or renewal term—is more than 30 days. Importantly, this may capture monthly subscriptions where some terms are 31 days long. The renewal notice must include the calendar date on which the consumer will be charged and disclose how the consumer can cancel.
Further, in addition to requiring businesses to offer online cancellation for subscription that a consumer can sign up for online, the proposed MA regulations would also require businesses to provide an email address and telephone number for cancellation. If a business “directly bills to the consumer,” then it must also provide a postal address for cancellation.
Junk Fees
The “junk fee” provisions of the proposed MA Regulations are aimed at prohibiting businesses from (i) tacking on additional fees late in the purchase flow or (ii) otherwise misrepresenting the nature of specific fees. Notably, this does not include taxes, shipping charges, or other fees required by federal, state, or local law. But it would cover cleaning fees, service fees, processing fees, installation fees, activation fees, equipment fees, early termination fees, fuel surcharges, etc.
The proposed MA Regulations would prohibit:
- Failing to disclose the full price (inclusive of all fees except those that are exempt) anytime the price of a product or service is presented (including the first time the price is presented).
- Failing to display the full price (inclusive of all fees except those that are exempt) more prominently than any other pricing information, including in contexts such as advertisements.
- Failing to disclose the full price before obtaining the consumer’s personal information unless the business must collect information to determine whether the sale is legal (based on things like age) or the service is available based on geographic location.
- Misrepresenting or failing to disclose information about fees, such as what their nature or purpose is, whether they are waivable (and if so, how to waive them), and whether they are required by law.
To the extent that a business charges such fees, the proposed MA Regulations would require the business to provide details about why they are being charged (i.e., what costs the fee is intended to cover). Disclosures required by the proposed MA Regulations must be clear and conspicuous, understandable to ordinary consumers, and translated into each language in which the representation requiring the disclosure appears. And if a given communication is presented in both visual and audible means, the business must present the relevant information simultaneously through both visual and audible disclosures, even if the representation requiring the disclosure—such as price—is made in only one form.
