California has introduced new legislation aimed at regulating fees associated with the early termination of fixed-term contracts. Signed into law by Governor Gavin Newsom, Assembly Bill 483 imposes transparency requirements and limits on these fees for installment contracts, which allow consumers to make recurring payments for various goods and services over a specified period.
The law addresses situations where businesses entice consumers into annual contracts featuring installment payments that can resemble month-to-month subscriptions, while imposing substantial cancellation fees for terminating early. The bill prohibits companies from hiding information about these fees in fine print or obscure links and establishes a maximum fee cap of 30 percent of the total cost of the contract. This measure seeks to facilitate easier comparisons among services and lessen the financial impact of canceling contracts prematurely.
In a recent statement, California Assembly Member Jacqui Irwin highlighted that many consumers have encountered unexpectedly high early termination fees. The new law aims to ensure that Californians will have clearer information regarding potential termination fees, which must now remain within a reasonable limit. The intention is to enhance transparency and predictability in consumer agreements across the state.
Additionally, the announcement draws attention to recent actions by Federal Communications Commission (FCC) Chair Brendan Carr, accused of weakening consumer protections by proposing the reinstatement of hidden internet service provider fees. It also references ongoing legal action against Adobe, involving allegations that the company concealed costly early termination fees, thus trapping consumers in expensive annual agreements. California’s legislation may set a precedent that prompts businesses across the nation to reevaluate their contract termination policies.
Source: https://www.theverge.com/news/799237/california-ab483-law-early-termination-fees