New York State Division of Consumer Protection and the New York Department of Financial Services Alert about Two New Laws that Provide Protections on Recurring Services, and on Inactivity Fees

New York Consumers Have New Protections Relating to Recurring Services and Relating to Inactive Accounts 

New Consumer Protections Put The “Free” Back in “Free Trial” 

The New York State Division of Consumer Protection and the New York State Department of Financial Services are issuing this alert to consumers regarding two new laws – one providing new protections when purchasing recurring services, and the other requiring notification by New York State regulated financial institutions prior to charging any account inactivity fees.

Under NY General Business Law, anyone selling automatic renewal programs or continuous services to New Yorkers must provide consumers an easy-to-use cancellation mechanism before the consumer pays for the service. Consumers who purchase these services online must also be allowed to terminate the agreement online at any time.

“Many consumers complain about companies billing their credit card after they call or go online to cancel their subscription. Some companies make it difficult to cancel or say they have cancelled service, but consumers continue to be billed,” said Secretary of State Rossana Rosado, who oversees the Division of Consumer Protection. “The new law empowers the Attorney General, on behalf of consumers, to go after companies that automatically renew and charge consumers without adequate notice.”

Under a new Banking Law[1], New York State regulated financial institutions that provide an account to a customer, must provide written notification of any pending charges to a customer thirty days prior to charging any fee based on account inactivity. The law allows such written notification to be sent electronically.

“We’re living in unprecedented times and consumers shouldn’t be penalized for simply not engaging in account transactions, which is exactly what account inactivity fees do, especially given that communities of color are disproportionally adversely affected by the pandemic and resulting economic crisis,” said Superintendent of Financial Services Linda A. Lacewell. “This new protection will ensure that New Yorkers, so many of whom are navigating economic uncertainties, aren’t caught off guard and penalized without notice for mere inactivity, and instead have the opportunity to avoid these unnecessary costs.”

“Automatic renewal” programs (subscription or purchasing agreements that are automatically renewed each term) or “continuous service” plans (subscription or purchasing agreements that continue until the consumer calls to cancel) must clearly state the cancellation terms to consumers before entering into the agreement. If consumers purchase the item online, those terms must be clearly stated near the purchase approval button. If consumers purchase over the phone, the terms must be read clearly before the consumer completes the purchase. These businesses must also provide a toll-free telephone number, email address or other cost-effective, timely, and easy-to-use option for consumers to cancel after agreeing to the contract.

In addition, if the original offer includes a free gift, the consumer can keep that free gift whether or not they cancel the service during the trial period or at a later date.

Consumers considering free offers should keep the following tips from the Federal Trade Commission in mind:

  • Do some research. Search the product and company name online with words like “review,” “complaint,” or “scam” to see what others are saying.
  • Find the terms and conditions for the offer. If you can’t find them or can’t understand exactly what you’re agreeing to and when you’ll be charged — including what you’ll be charged for and the date by which you have to act to avoid a charge – don’t sign up.
  • Monitor your credit and debit card statements. If you’re charged for something you didn’t order, dispute those charges as soon as you spot them.

If it is believed a company is not following the new law when offering recurring services or free gifts, consumers should file a complaint with the Division of Consumer Protection at www.dos.ny.gov/consumerprotection.

If consumers are charged account inactivity fees without the required notice, they are encouraged to file a complaint with the Department of Financial Services at https://www.dfs.ny.gov/complaint.

The New York State Division of Consumer Protection provides voluntary mediation between a consumer and a business when a consumer has been unsuccessful at reaching a resolution on their own. The Consumer Assistance Helpline 1-800-697-1220 is available Monday to Friday from 8:30am to 4:30pm, excluding State Holidays, and consumer complaints can be filed at any time at www.dos.ny.gov/consumerprotection. The Division can also be reached via Twitter at @NYSConsumer or Facebook at www.facebook.com/nysconsumer.

[1] NY Banking Law §9-x*2. There is a separate/unrelated NY Banking §9-x that deals with mortgage forbearance.