Any company selling Colorado consumers online goods and services via subscriptions or ongoing agreements must offer them an electronic way to cancel automatic-renewal contracts just as easily as they set them up, according to a law enacted this week.
Senate Bill 145 is not expected to have wide-ranging impacts or to affect the ability of companies to do business in this state in any substantial way. But opponents say it is yet another glaring example of how far the state will go to regulate companies’ interactions with consumers, and it shows a legislative willingness to interfere with the contractual process even when there isn’t proof of a serious problem to fix.
The bill was a follow-up of sorts to legislation that sponsoring Sen. Cathy Kipp, D-Fort Collins, passed in 2021 requiring companies that renew contracts automatically to explain the terms of the contract clearly and conspicuously. That bill also required those companies to send notices about coming automatic renewals between 25 and 40 days before the renewals and to provide simple mechanisms for cancellation.
Kipp told the Senate during debate on March 20 of this year’s session, however, that she’d left a loophole in that law that SB 145 was attempting to fix. Specifically, this new law requires that the one-step cancellation option for any contract signed online must also be made available online in a “simple, cost-effective, timely, easy-to-use and readily accessible mechanism.”
Attempt to make cancellations “simple” for consumers
SB 145 also allows companies to offer an in-person mechanism for cancellation of a contract or trial-period offer at a location where customers regularly utilize any goods or services related to the contract, such as a consumer-facing company service center. But the idea, sponsors emphasized, was that ending such a contract should be no more difficult than making the same clicks that someone made to get into it.
“If you sign up for something online, we’re trying to make it so that you can also cancel online,” said Democratic Rep. Mandy Lindsay of Aurora, who sponsored the bill in her chamber with Democratic Rep. Yara Zokaie of Fort Collins. “You should not have to go to a physical location to stop a service. This is quite simple.”
SB 145 did not engender opposition so much as it caused companies and business organizations ranging from Amazon to Adobe to the Colorado Chamber of Commerce to seek amendments to ensure compliance was not overly difficult. To that end, Kipp added a provision in the Senate letting companies display discounted offers or retention benefits when someone seeks to cancel a contract — but to have to process that cancellation immediately if someone goes through with ending the deal.
Interestingly, no lobbyist registered with the Colorado Secretary of State’s office as supporting the bill.
House Republicans raised significant concerns
After the changes, the bill flew through the Senate on a largely bipartisan 29-5 vote. But when it got to the House, Republicans raised questions of why SB 145 was necessary and said that it demonstrated how overboard the Legislature has gone on inserting itself into even minor disputes between businesses and state residents.
Rep. Ryan Armagost speaks against a bill on automatic-renewals regulations on the House floor in April.
Rep. Ryan Armagost, R-Berthoud, said SB 145 essentially absolves residents from taking responsibility for contracts they signed, decided to get out of and then forgotten to cancel, putting the state in the position of saying it would protect them from such lack of action. By making companies go out of their way to ensure that their sales can be canceled, Colorado is going beyond the “nanny-state” label that conservatives like to attach to overregulation and telling citizens that they don’t have to worry even about mistakes they made, he said.
“We don’t need to be changing the diapers of our citizens,” Armagost said during debate on the House floor on April 23. “We need to let people mature and have their own level of conflict resolution.”
Other House Republicans — who all opposed the bill, ensuring it passed that chamber in a purely partisan vote — complained that violation of Title 6 statutes, under which this law is classified, constitute violations of the Colorado Consumer Protection Act. CCPA violations are subject to fines of as much as $20,000.
Lindsay argued in return that the business models of some companies rely on customers having such a hard time cancelling contracts that they don’t bother to do so. Zokaie added that some contracts have so much fine print that consumers don’t understand how to get out of them.
Does law erode business competitiveness?
“The idea that people are not being smart enough is insulting,” Zokaie said during debate.
But Rep. Chris Richardson, R-Elizabeth, said the very purpose of the bill stunts self-sufficiency and tells people that Colorado will hold their hand even through seemingly minor processes like these, turning the government now into a “sippy-cup state.”
And, Armagost added, this will increase the number of lawsuits being filed against businesses, further degrading the state’s business friendliness. The American Tort Reform Association recently classified Colorado as a “legal inferno” because of its liability-expanding legislation, though it did not mention SB 145 in conveying that designation.
“There is so much in this building that creates litigation and creates this ability for people to take less responsibility and then take legal actions afterward,” Armagost said. “You have to make choices, and you have to take accountability for those choices.”
Gov. Jared Polis has called the Legislature back into special session, beginning on Aug. 21, to plug a nearly $800 million budget shortfall, consider raising fees on health-insurance policies to fund subsidies and tackle artificial-intelligence regulation. The debate around how closely the state must monitor AI programs for potential discrimination will be another that raises the question of how much Colorado is responsible for protecting its consumers in an increasingly digital economy.