Colorado Updates Requirements for Consumer- and Business-Facing Automatically Renewing Contracts

Quick Hits

• Colorado’s law governing automatic renewal clauses in contracts now applies to businesses and individuals, rather than just individuals.
• Online automatic renewal contracts must have an online method of cancellation that does not obstruct a business’s or individual’s ability to terminate automatic renewal or continuous service, immediately.
• Businesses may still display retention offers or discounted pricing during the cancellation process, but the business must simultaneously and prominently display a cancellation link.
• For automatic renewal contracts consented to by a method outside of online means or electronic communication, and where no online cancellation option is available, cancellation must be at a physical location where the consumer utilizes any goods or services in the contract.

Under previous law, if an individual consumer consented to an automatic renewal contract through an online medium, the business could provide cancellation opportunities either online or in person.

New Requirements Under SB25-145

The law, Colo. Rev. Stat. § 6-1-732, as amended by Senate Bill (SB) 25-145, requires that if a contract was signed through an online medium, an online option for cancellation must be made available to the business or individual. This online option must further satisfy “one-step online cancellation,” which the bill defines as an online cancellation method that doesn’t obstruct or cause delays in termination of the contract or require additional action from the consumer. The amended law specifically outlines that compliance can be achieved by a one-step cancellation link through an online medium or electronic communication that is available to the consumer immediately after the consumer completes a reasonable authentication protocol.

For businesses or individuals who consented to an automatic renewal contract through means other than a website, online medium, or electronic communication, the mechanism for automatic renewal cancellation may be online or at a physical location where “the consumer utilizes any goods or services” that are subject to the automatic renewal contract.

Retention Offers and Cancellation Page Considerations

The amended law also outlines guidelines for displaying promotional material during cancellation by an online system. Now, a business may display a discounted offer, a retention benefit or information regarding effects of cancellation, so long as the direct link to cancel remains visible and prominently located.

Looking forward, businesses may want to consider the following steps:

• Auditing all contracts containing automatic renewal clauses that are offered to Colorado residents and businesses to confirm compliance with Colo. Rev. Stat. § 6-1-732
• Reviewing current online cancellation protocols in automatic renewal contracts offered to individuals or businesses in Colorado to ensure they satisfy the one-step cancellation requirements
• Ensuring that any promotional material on a cancellation page does not block any cancellation link, and that cancellation does not require significant additional steps beyond reasonable authentication

Ogletree Deakins’ Denver office will continue to monitor developments and will post updates on the Colorado blog as additional information becomes available.

Michael H. Bell is the office managing shareholder of Ogletree Deakins’ Denver office, and a shareholder in the firm’s Dallas office.

Tyler C. Strobel is an associate in the Denver office of Ogletree Deakins.

Emma Hay is a law student, currently participating in the summer associate program in the Denver office of Ogletree Deakins.

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