Massachusetts automatic renewal rules for restaurant memberships

A Massachusetts restaurant that sells a monthly pastry box, a wine club or a paid regulars' membership is running a plan where the guest's silence renews the purchase. The Attorney General's consumer protection regulation, 940 CMR 38.00, has a section on exactly that, and a violation is treated as an unfair and deceptive practice under Chapter 93A. The Attorney General's office and a lawyer can tell you how it applies to your program.

Does the regulation cover a restaurant membership?

Yes, if it is sold to individuals for personal use. The regulation applies to advertising, marketing, solicitation or an offer of sale that is targeted to, or results in, a sale in Massachusetts. Its definition of a product includes a good or service for personal, family or household use, and the definition says in so many words that a product includes memberships, subscriptions and dwelling units available for rent. A negative option feature is a contract term under which the consumer's silence or failure to take action to cancel or non-renew is treated by the seller as acceptance. An automatic renewal is one of the examples.

What must you disclose before a guest signs up?

For a product with a negative option feature, you must disclose clearly and conspicuously, and in writing, before the purchase, that the consumer will be charged or that charges will increase after any trial ends, that the charges will recur unless the consumer takes steps to stop them, and how to cancel. Put these next to the sign-up button, in plain words, with the price and the date of the first charge. A link to a long terms page is not enough on its own.

What is a trial offer?

A trial offer is a free or discounted period before the full price begins, and it has a longer list of disclosures. Before the guest accepts a trial offer, you must disclose in writing any financial obligation that may follow, which products it covers, how to cancel before the obligation starts, the calendar date by which the guest must cancel and the calendar date on which the guest will be charged. A coffee club that gives the first month for a dollar needs to name both dates.

How must cancellation work?

You must provide a simple mechanism to cancel and stop recurring charges at once. It must be at least as easy to access and use as the method the guest used to sign up, and it must be available at least through the same medium. If the guest signed up on your website, the cancel option must be on the same website or web application. If the guest signed up by telephone, there must be a phone number whose calls are answered promptly during normal business hours and which costs no more than the call used to sign up. If the sale happened in person, the mechanism must be available online or by phone and, where practical, in person too. A guest who joined at the counter may therefore cancel online.

When must you send a reminder?

For a negative option longer than 31 days, you must send written notice between 30 and 5 calendar days before the date by which the guest must cancel to avoid the next charge. The notice must state the financial obligation, the products covered, how to cancel, the calendar date to cancel by and the calendar date the guest will be charged. It has to reach the guest through a medium like the one used to sign up, or one the guest chose as their preferred method of contact. For a contract of 31 days or less, you must either send that notice or tell the guest with each charge the amount charged and how to cancel.

What are the penalties?

A failure of these disclosures and mechanisms is an unfair and deceptive practice under Chapter 93A, section 2. The Attorney General enforces Chapter 93A, so ask a lawyer about your exposure. Treat a complaint as serious.

How do you test your own program?

Sign up for your own club on a phone, as a guest would. Is the price near the button? Does the confirmation say how to cancel? Then try to cancel the same way, and count the steps. If it takes more steps to leave than to join, fix it. Set a calendar reminder that matches the notice window, or configure your subscription system to send the notices, and keep a copy of each one.

What should you do next?

List every product that renews on its own and the date each guest's next charge falls. Write the plain-language disclosure and put it next to the button. Add a cancel link to the confirmation email. Then read how Massachusetts treats fees in menu prices, since the same Attorney General regulation covers both.

More guides for your business:

• Massachusetts junk fee rules for restaurant service charges and surcharges
• Massachusetts credit card surcharge ban and cash discounts for restaurants
• Massachusetts gift card law for restaurants: the seven year rule

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