Key Changes to Subscription Billing in Minnesota
Minnesota law prohibits retention offers during cancellation and makes other requirements of subscription-based businesses. Are you compliant?
In a new law, effective January 1, 2025, our home state of Minnesota takes aim at subscription billing practices. The law prohibits displaying retention gifts or other incentives during the cancellation process. However, businesses can ask for permission to present such offers after cancellation is complete.
Like the FTC’s “click to cancel” rule and other state statutes, Minnesota’s law requires businesses to provide clear disclosures, obtain consent to subscription billing, and provide easy cancellation. Businesses that provide web-based profile and/or subscription management features must allow online cancellation as well.
If your subscription-business sells to consumers in Minnesota, keep reading to discover how the law affects subscription signup, cancellation and more.
Disclaimer: The guidance provided herein is for informational and educational purposes only and does not constitute legal advice. Please consult a legal/compliance representative when implementing subscription compliance policies and practices.
No, the legislation regulates B2C agreements between sellers and consumers in Minnesota. A consumer is defined as “any individual who seeks or acquires, by purchase or lease, any goods, services, money, or credit for personal, family, or household purposes” (emphasis added).
Overview of the ARL
Minnesota's law (Minn. Stat. § 325G.56) applies to businesses offering subscription services to consumers in the state. Key points include:
Clear disclosures – Businesses must clearly disclose terms like cancellation policy, recurring charges, and any minimum purchase obligations before a consumer subscribes.
Consent – Businesses must obtain consent from the consumer before charging them for a subscription.
Confirmation – A confirmation message with the offer terms and cancellation instructions must be sent to the consumer in a retainable form (like email).
Notices – Notices must be sent for material changes, before a free trial converts to a paid subscription, and annually for subscriptions without a termination date.
Easy cancellation – Cancellation must be easy, cost-effective, and timely. Online cancellation must be offered if the business has online subscription management.
Let’s look closer at how each of these requirements affects subscription businesses.
The following are exempted from the Minnesota statue:
Contracts governed by another state or federal ARL
Licensees or affiliates as defined in section 60A.985 and 60D.15
Individuals or businesses licensed as a technology system contractor or power limited technician by the Department of Labor
Businesses or affiliates licensed or regulated by the Public Utilities Commission, the Federal Communications Commission, or the Federal Energy Regulatory Commission
Any person or entity registered or licensed with the Financial Industry Regulatory Authority, the Securities and Exchange Commission or under the Minnesota Securities Act
Subscription signup and the ARL
In summary, when offering a subscription, businesses must:
Present offer terms in a “clear and conspicuous” manner before the consumer consents to the subscription
Send a confirmation message in a retainable form, such as an email, that includes offer terms and how to cancel
Clear and conspicuous disclosures
The law requires that the terms of automatic renewal agreement be displayed in a “clear and conspicuous” manner, and in “visual or temporal” proximity to the offer’s proposal.
“Offer terms” must include:
That the subscription will continue until terminated by the consumer
A description of the applicable cancellation policy
The amount of the recurring charges
That the amount may change (if applicable), and the amount to which it will change (if known)
When the subscription will expire, or if it is ongoing (unless the term is chosen by the consumer)
Minimum purchase obligation, if any
Per Minnesota’s ARL, clear and conspicuous means “in larger type than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same size, or set off from the surrounding text of the same size by symbols or other marks, in a manner that calls attention to the language.” For audio, it means in a “volume and cadence sufficient to be readily audible and understandable.”
Additionally, no agreement may “require the consumer to permit the seller to match any offer the consumer has received.”
Consent
Before charging Minnesota consumers via automatically renewing agreements, businesses must first obtain consent to the subscription.
Under the law, any good sent to the consumer by the business without first obtaining “affirmative consent” is deemed an “unconditional gift.”
Subscription confirmation
Businesses must also provide a post-transaction confirmation to the consumer in a “timely manner” and in a form that can be retained by the consumer (such as an email).
This confirmation must include:
The offer terms (see above)
How to cancel a free trial (if applicable) before being charged
Options for cancellation, which must be “easy to use, cost-effective, and timely for all consumers” (see more below)
Notices
Besides the confirmation acknowledgement, Minnesota law requires sellers to send notices under the following conditions:
Material changes - In the event of a material change to the subscription agreement, businesses must provide a “clear and conspicuous” notification of the change in a “timely manner” and before it takes effect. This notification must be in a form that can be retained by the consumer and must contain information about how to cancel.
Before free trial conversion - For free trials lasting longer than 30 days, the business must notify the consumer of the option to cancel the trial 5-30 days before the trial converts.
Annually - For subscriptions without a termination date, businesses must provide a notification of the subscription at least once per calendar year by mail or email. This notification must include the terms of service and how to cancel or manage the subscription.
Subscription cancellation and the ARL
Minnesota mandates that cancellation be “easy to use, cost-effective, and timely for all consumers.” Businesses must not engage in “unfair or abusive tactics” to delay or prevent cancellation nor make offers of additional benefits, gifts, contract modifications or the like upon “notice of cancellation” by the consumer.
After cancellation, businesses may ask once for permission to present such offers to the consumer.
The statute clarifies that it is legal for businesses to:
Verify the consumer’s identity
Inform the user of any consequences related to canceling the subscription
Ask for cancellation feedback, but not require it
Present alternatives to maintain an account, such as pausing or downgrading the subscription
Online cancellation
Minnesota law stipulates that businesses with profile or subscription management options on their website must provide an online cancellation mechanism. The website must clearly and conspicuously convey in “plain language” that any consumer may cancel at any time.
Cancellation must be “simple and easily accessible” and must not involve any “undue complexity, confusion or misrepresentation.” The form may only ask for information “necessary to process the termination.”
Other signup methods
For consumers who signed up via a method other than phone, email or postal mail, businesses must offer a cancellation method “substantially similar" to, as easy to use, and as accessible as the initial means of consent.
Consumer’s right to cancel
Under the ARL, a Minnesota consumer must be allowed to cancel at any time via the cancellation procedures described in the confirmation notification.
Cancellation will be effective at the end of the term in which cancellation notice was provided (but no more than 31 days), unless the consumer specifies a termination date at the end of a subsequent term.
If the business fails to provide either the confirmation acknowledgement or the other notices described above, the consumer may cancel the subscription “by any reasonable means at any time.”
ProsperStack makes compliance easy
With state and federal subscription cancellation legislation coming into effect this year, now’s the time to discover ProsperStack.
Trusted by brands like Nutrafol, Nestle and Hootsuite, ProsperStack Retain is churn-busting cancellation flow software with robust reporting, A/B testing and AI offer optimization. And because we integrate with your subscription billing platform, your new compliant cancellation flow can be up in days, not months.
Upgrade your cancel button today and start retaining more of your most valuable customers.
