Do Trump’s Automatically Recurring Donations Violate the Law?

Published On August 8, 2016 | By Jake Sommer and Zach Lerner | General

Donald Trump is no longer dependent on hat and t-shirt sales to fund his presidential campaign. Instead, Trump and the Republican National Committee are employing more traditional fundraising techniques, raising $64 million in July through online and mail-in donations. These totals will likely continue to increase, in part because many of Trump’s donors agreed to make recurring monthly donations to his campaign. But are these donations being collected in compliance with the law? More precisely, does Trump’s campaign website conform to the requirements of California Business & Professions Code § 17602, and if not, does it violate the statute?

The California law—and other state auto-renewal laws—likely do not apply to Trump’s campaign because it is not a “business” and does not offer “goods or services” to consumers. But, the Trump campaign’s auto-renewal failures—and the negative press they have generated—are an important lesson for any company offering recurring subscription services, memberships, or contracts.

California law requires that businesses offering recurring subscriptions make certain disclosures clearly and conspicuously both at the point of sale and in a written acknowledgment provided after the customer buys the subscription. Companies must present the point of sale disclosures in visual proximity to the request for consent (whether a “purchase” or “donate” button). The disclosures must (1) convey that the recurring payments will continue until the customer cancels, (2) describe the cancellation policy, and (3) specify both the amount to be charged and the length of the subscription term. The acknowledgment—whether an email confirmation or confirmation web page—must include those same three disclosures and information regarding how to cancel the subscription. Companies must also provide an easy-to-use mechanism for cancellation.

Trump’s campaign website does not make clear that recurring donations will continue until canceled or describe how donors can discontinue their recurring donations. After making a donation, donors receive an email from “Team Trump” thanking them for their generous donation. This acknowledgment fails to communicate that the donation will repeat each month or provide information on how the donor can cancel the recurring charge.  There is no phone number, email address, physical address, or other “cost-effective, timely, and easy-to-use mechanism for cancellation.” Recent press reports indicate that donors cannot cancel their recurring donations.  Recurring donations seemingly may continue beyond the November election, in perpetuity.

Because it is not a business and does not offer goods or services to consumers, Trump’s campaign is unlikely to face action by the California Attorney General or a class action complaint. For companies forming auto-renewing contracts with California residents, the potential for public or private enforcement presents significant risks.  Plaintiffs have used the law against numerous companies offering subscriptions, ranging from cloud storage services to beauty box subscriptions. Defense against these claims is often expensive and time-consuming, and for businesses that sell physical products, it can be especially costly. The law includes a severe statutory penalty, which might require the offending company to refund every payment made by a California consumer.

We recommend that companies utilizing contracts which automatically renew assess their compliance with the California requirements and other state auto-renewal laws, some of which place additional obligations on businesses that offer subscription terms longer than one month. Complying with these laws is relatively easy and will also bring your company in line with various credit card acceptance guidelines and best practices.

 

About The Authors

Jacob Sommer's practice focuses on legal issues related to Internet-based services and social networking, with a focus on protecting client's rights in litigation or government investigations involving the Copyright Act, Lanham Act, Digital Millennium Copyright Act ("DMCA"), Electronic Communications Privacy Act (“ECPA”), the Wiretap and Communication Acts, CAN-SPAM, FISA and federal and state laws governing Internet gambling. He also helps social networks, search engines, e-mail providers, ISPs and other clients fulfill their compliance obligations pertaining to the discovery and disclosure of customer and subscriber information.

Zach Lerner’s practice focuses on a variety of legal matters impacting Internet-based companies. He helps companies in a wide range of industries including education technology, financial technology, unmanned aerial vehicles, and fantasy sports with issues related to privacy, e-commerce, and advertising.

Comments