California cracks down on ‘predatory’ early cancellation fees

California has passed new legislation aimed at stopping companies from charging consumers “exorbitant” fees to cancel fixed-term contracts. Assembly Bill 483 was signed into law Friday by California Gov. Gavin Newsom, imposing transparency requirements and fee limits for early terminations of installment contracts — plans that allow consumers to make recurring payments for goods and services over a specified duration.

This includes services that incentivize consumers to sign annual contracts by allowing them to pay in installments that resemble rolling monthly subscriptions, but with high cancellation fees for not committing for the entire year. The bill prohibits companies from hiding early termination fees in fine print or hidden hyperlinks, and limits the total amount of fees to a maximum of 30 percent of the total contract cost. The goal is to make it easier for Californians to take these fees into account when comparing services, and to reduce the financial burden if they have to end their contract early.

“Too many Californians have been shocked by outrageous early cancellation fees when trying to end an installment plan early,” California Assembly Member Jacqui Irwin said in a press release. “With AB 483, Californians will know exactly what kind of termination fees they might have to pay – and those fees will never exceed a fair limit. Keeping these agreements transparent and predictable is a win for consumers across the state.”

The ad also calls out Federal Communications Commission Chairman Brendan Carr for weakening consumer protections — having recently proposed reinstating hidden ISP fees — and points out that the U.S. government is suing Adobe for allegedly hiding costly early termination fees and trapping consumers into expensive annual subscriptions. While the lawsuit against Adobe is ongoing, the new California law could set a national standard that would force the company to review its contract termination practices.