Business Law
Key Statutory Developments

Consumer Protection, Crowdfunding, and the Regulation of Payment Processors

The 2021 legislative cycle brought some additional consumer protections in the form of more changes to the California Automatic Renewal Law, as well as changes to adhesion contracts intended to limit delays in arbitration caused by the businesses that drafted the mandatory arbitration provision. In other news, the Fair Debt Settlement Practices Act takes aim at payment processors, prohibiting them from engaging in unfair, abusive, or deceptive acts or practices. Finally, lawyers representing start-ups and small businesses may be interested in the new statutory exemption for small intrastate crowdfunding.

California Adopts New Debt Settlement Law

Assembly Bill 1405 enacts the new Fair Debt Settlement Practices Act (FDSPA), intended to rein in the controversial debt settlement industry — and, in what may become a new regulatory trend, its payment processors as well. Attorneys may be subject to the new FDSPA requirements, too.

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Significant Changes to California’s Already-Robust Automatic Renewal Law

Assembly Bill 390 was part of a package of consumer financial protection bills that make significant changes to California’s Automatic Renewal Law (ALR), found at Business & Professions Code § 17602, subds. (a)-(f). Already more comprehensive than the protections provided by the Federal Trade Commission, the adjustments to the ALR go into effect July 1, 2022 and, among other things, allows consumers to cancel “exclusively online, at will, and without engaging in any further steps that obstruct or delay the consumer’s ability to terminate the automatic renewal… service immediately.” (New Bus. & Prof. Code § 16602, subd. (d)(1)).

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New Reasonableness Limitation on Time Limits in Adhesion Contracts

SB 762 places certain requirements on employment and consumer arbitrations while quietly imposing a new “reasonableness” limitation on time limits on adhesion contracts. The law makes three changes that address delays in arbitrations caused by the party that drafted the mandatory arbitration provision: (1) prompt invoices, due on receipt, to initiate arbitration, (2) prompt invoices, due on receipt, to continue arbitration, and (3) reasonable time limits in adhesion contracts.

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New Corporations Code Exemption for Small Intrastate Crowdfunded Offerings

AB 511 establishes a new Corporations Code exemption (Corporations Code § 55102(r)) for small intrastate crowdfunded offerings. This new exemption aims to increase access to capital for California entrepreneurs and small business owners by enabling them to tap into the “crowd” within California’s borders to help grow their businesses.


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