Could Your Auto Renewal Program Put Your Association at Risk?

Member renewal is top-of-mind for most association executives. In a business environment fraught with uncertainty, automatic renewal programs can offer tremendous peace of mind for many reasons, not the least of which is eliminating the barrier to purchase. While it may seem like the tough work is done once your members have shared their credit card information and agreed to auto-renewal, that's not the case. Changes to card brand rules, state and federal automatic renewal laws and a renewed vigor for their enforcement mean that association leaders must be vigilant about compliance to avoid the risk of predatory lawsuits and penalties for lack of compliance related to auto-renewal programs.     

Requirements for Auto-renew programs

In a recent webinar hosted by law firm Venable, LLP, Partners Berge and Rothermel summarized the requirements for legal compliance for automatic renewal programs (also known as continuous service, continuity, subscription, or negative option programs). Such programs must include the following:

• Clear and Conspicuous Disclosures - Disclosures must clearly call attention to the language, with larger type than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same size, or set off from the surrounding text of the same size by symbols or other marks. 

• Affirmative Express, Informed Consent - Associations must obtain the member's affirmative, express informed consent before getting their credit card, debit card, bank account, or other financial accounts. The agreement must be explicit and unambiguous for enrollment. Terms should appear on the same screen near the agreement. (A hyperlink to the terms does not suffice.) If a free gift or trial is offered, instructions on canceling should be disclosed before the member begins to pay. 

• Order Confirmation - It is best practice (and law in some states) to provide the member confirmation in an easily saved form. The confirmation should include the terms of the offer, the cancellation policy, and information about how to cancel. 

• Simple Cancellation Mechanism - Association auto-renewal systems must provide a simple, cost-effective, easy-to-use, and readily accessible mechanism for a member to stop recurring charges. At a minimum, this should include a toll-free telephone number, email address, or postal address (if the association directly bills the member). In general, if the member accepts an automatic renewal offer online, it's good practice (and a legal requirement in some states) to provide the means to cancel online as well.

• Renewal Reminders - Associations should notify members of an upcoming renewal. The laws regarding the timing and content of these notifications vary from state to state, so if your association serves members in multiple states, a series of renewal reminders may be required to ensure compliance. In general, the notification should state that the automatic renewal will renew unless canceled by the member, be provided in an easily-saved format, and include the length of the renewal period, one or more methods by which the member can cancel, and contact info for the association. 

• Material Changes to the Offer - Associations are required to provide members enrolled in auto-renew programs with a clear and conspicuous notice of any changes to the program (including dues fees and processing charges) and information regarding how to cancel. The notice should be provided in an easily-saved format, hyperlinked to the cancellation mechanism. It's best to obtain members' affirmative consent to the changes.  

Next Steps

Ensuring compliance can seem like a heavy lift, but all of these requirements demonstrate consideration for association members and may actually help associations keep members over the long haul. 

PLEASE NOTE: This blog summarizes a complex issue and does not replace legal advice. Association leaders should consider checking out Venable's recent article, conferring with their legal counsel, and, perhaps, consulting with your AMS and/or e-commerce providers. If you'd like to learn more about the value of auto-renew programs for associations, check out this post from MSAE member Billhighway.