Senate Passes Bill Protecting Against Automatic Renewals in Contracts

The Delaware State Senate on Wednesday passed Senate Bill 93(S) to protect consumers from unknowingly entering into service contracts with hidden automatic renewals, known as “evergreen” clauses.

The bill, sponsored by Sen. Nicole Poore and Rep. Val Longhurst, would require companies to present evergreen clauses in a clear and conspicuous manner and provide a written notice to consumers about an upcoming renewal. The bill also would require businesses to provide consumers with a way to cancel the contract that is at least as easy to use as the means they used to sign up for the contract.

Any contract in violation of the provisions laid out in this bill would be considered voidable by the consumer. Additionally, while sellers would be able to retain a prorated fraction of any prepaid fees or costs based on the date of cancellation, the outstanding amount would be due to consumers within 30 days.

Twenty-nine states and the District of Columbia currently have some type of law regulating the automatic renewal of contracts or evergreen clauses.

Advocates nationwide have pointed to several benefits of automatic renewal laws, including increased consumer choice and flexibility, more robust competition between businesses, and greater transparency.

This Senate substitute included the following changes to Senate Bill 93: 

• Extend the timeline to contracts in effect for 12 months instead of 6 months;  
• Clarify that people who sign up for a contract online can cancel online; 
• Push back the effective date to 2022 to give businesses more time to prepare for the changes;   
• Establish a right to cure for businesses to give them an opportunity to remedy mistakes before action is taken against them. 

SENATE BILL 93 (S) SPONSORS	YES VOTES	NO VOTES
Poore, Ennis, Gay, Hansen	Senate Passes 21-0. Brown Ennis Gay Hansen Lockman Mantzavinos Paradee Pinkney Poore S.McBride Sokola Sturgeon Townsend Walsh Bonini Hocker Lawson Lopez Pettyjohn Richardson Wilson	None
Longhurst, Heffernan, Hensley, Lambert, Osienski, Wilson-Anton
CURRENT STATUS —	Sent to the House

“We have all been a victim of automatic renewals at some point,” said Sen. Poore. “Sometimes it’s on us, but sometimes it comes down to fine print and manipulative tactics used by companies to help us forget about upcoming cancellation deadlines. This bill mirrors legislation in several other states and finally levels the playing field on cellphone contracts, gym memberships, and any number of other contracts that use these clauses.”

“For too long, companies have taken advantage of unsuspecting customers with inconspicuous evergreen clauses,” said House Majority Leader Longhurst. “With this legislation, we’re making sure consumers can make informed decisions about the contracts they are entering into before a surprise monthly charge shows up.”