What You Need to Know About Recurring Billing Laws

What You Need to Know About Recurring Billing Laws

Recurring billing and the subscription business model are currently at the height of their popularity. Due to it benefiting both the business and the customers, recurring billing has been used by many businesses worldwide. Unfortunately, a few too many oblivious and misinformed business people have taken advantage of automated billing in a negative way without knowing the recurring billing laws. These exploits have led to angry customers, lawsuits, and other legal matters involving the state and the national government. 

The problem isn’t the subscription service. There’s absolutely nothing wrong with the recurring billing model. The issue lies with how the business utilizes it. As a business owner using subscription billing, you need to know all the relevant laws and regulations surrounding this business model. 

You want your business to flourish and develop as soon as possible. The last thing you want is to deal with high customer complaints and churn rates over a careless mistake or oversight. Stay on track with your goal using recurring billing while following the legal stipulations that come with it. 

To give you some valuable insight, let’s look at an example of a company that uses recurring billing and what they do to stay in line with recurring billing laws.

The Case of VistaPrint

VistaPrint is an online digital printing service popular for creating custom business cards at an incredibly low price. However, despite its recent rise in fame, the brand has been in hot water due to its involvement in multiple lawsuits and high-profile controversies. 

In one particular issue, consumers and critics criticized VistaPrint for secretly providing customer credit card details to a third-party company named Vertrue Inc. — a consumer services marketing company. That means every time a consumer transacts with VistaPrint, Vertrue also charges them with a fee of their own without the consumer’s consent. In addition, 

Vertrue is a shady company that has been accused of numerous deceptive solicitation practices involving free trials and gifts. Similar to VistaPrint, the company also employs subscription services. The only issue is that they deceive consumers while they use this otherwise effective billing strategy.

In 2009, a couple of VistaPrint customers from Texas filed a lawsuit against the brand. The plaintiffs claim to be “deceived” by VistaPrint into enrolling for multiple membership programs that come with monthly billing. However, the local Federal Judge from the 5th Circuit ruled the case in favor of VistaPrint, stating that a membership signup process is not deceptive as it possesses two underlying elements:

  • Clear and easily understandable term of service
  • A prominent and conspicuous notice

How Did the Court Determine the VistaPrint’s Signup Process

To put it simply, the court was able to determine that VistaPrint’s signup process contained all the information that consumers needed to know — including the potential charges that the signup would include. These details include the following:

  • Membership terms and conditions are located in a box beside the survey required for customer enrollment.
  • Full disclosure presented right above the space for entering a consumer email address.
  • Full disclosure containing the following unambiguous language in a font that’s the same size and color as the entire page or copy: “The membership fee of $14.95 per month will be charged by VistaPrint Rewards to the credit or debit card you used today.”
  • Requiring customers to check a box to indicate that they have fully read the details of the agreement.

Takeaways

For consumers, the apparent conclusion to this matter is that it’s absolutely crucial to read and understand the terms of the agreement, especially when a debit or credit card is involved. On the other hand, the main takeaway for businesses is the importance of providing clear billing terms that don’t contain any hidden clauses that might result in disputes and issues later on.

Recurring Billing Law in California

Different states have different laws involving recurring billing. These regulations ensure that businesses utilize this billing model the right way while protecting consumers from fraud and deception. A great example is the California Automatic Renewal Law of 2010.

Prevention of Charging Without Consumer Consent

The law prevents the ongoing charging of consumer credit/debit cards or third-party payment accounts without the consumer’s explicit consent for ongoing deliveries of products or services. Instead, the law requires the clear, unbiased, and conspicuous display of service terms that the consumer needs to read and approve before purchase agreements are fulfilled. That means before the business can charge and collect payments from its customers’ accounts, they will need to ask for approval before they can do so.

Clear and Concise Billing Terms

In addition, the business also needs an acknowledgment that includes the continuous offer terms (automatic renewal), cancellation policy, and concise details on how to cancel in a way that is capable of being retained by the consumer. Businesses making automatic withdrawals from customer accounts will need to provide a toll-free phone number for consumers to contact for concerns, inquiries, and more.

While violating the California Automatic Renewal Law doesn’t result in a criminal action, it will make your business vulnerable to class action lawsuits within the state. That’s why you should consider reading, understanding, and complying with the law to avoid any potential issues coming your way.

ROSCA

Another one of prominent recurring billing laws is the ‘Restore Online Shoppers’ Confidence Act of 2010 (also known as the Federal ROSCA). This law prohibits charging consumers for products or services over the Internet through a ‘negative option’ feature (which means failure to opt-out is still considered as opting-in implicitly). Instead, charges must be made with clear and full disclosure of material terms before the business can obtain the customer’s billing information. In addition, the company also needs to express well-informed consent and a “simple and understandable option” whenever the customer wants to stop the recurring charges on them.

Why ReliaBills is the Best Choice for Recurring Billing

Now that you have an idea of what recurring billing laws are and why they exist, the next thing you need to do is determine the ideal provider for your recurring billing strategy. While numerous platforms are available, nothing comes close to the convenience and ease of use that ReliaBills provides. 

What is ReliaBills?

ReliaBills is an online invoicing and recurring billing platform that provides businesses with the ability to automate their invoices, recurring billing plans, and payments. It’s a complete all-in-one platform that includes customizable templates for your recurring bills or contracts, automated payment plans & reminders, as well as easy integration options for third parties such as QuickBooks. 

Other Features

ReliaBills also offers customer support, a comprehensive FAQ, and other resources to assist you if you need any assistance. So, if you want a convenient way to create stunning invoices and a solid recurring billing strategy for your business, look no further than ReliaBills.

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