California has introduced a significant piece of consumer protection legislation designed to curb what policymakers have described as “exorbitant” or excessively burdensome fees that companies often impose when customers attempt to cancel fixed-term contracts before their agreed-upon end dates. This measure, formally known as Assembly Bill 483, was signed into law by Governor Gavin Newsom on Friday, marking an important step in the state’s ongoing effort to ensure fairness, clarity, and accessibility in contractual agreements between businesses and consumers.
At its core, the new statute establishes mandatory transparency requirements and fee limitations specifically targeting early termination clauses in installment-based contracts—arrangements that allow individuals to pay for products or services through recurring installments distributed evenly over a predetermined time frame. This category encompasses a wide range of modern subscription and service models, including those that entice consumers into yearly commitments under the pretense of flexibility by presenting installment payments that mimic the structure of standard month-to-month subscriptions. However, these ostensibly convenient agreements often disguise substantial financial penalties for consumers who wish to terminate early, effectively penalizing those unable or unwilling to remain locked into long-term commitments.
Under Assembly Bill 483, such practices are being decisively curtailed. The legislation explicitly prohibits businesses from obscuring early termination fee disclosures in fine print, hidden hyperlinks, or other deliberately inconspicuous forms of presentation. Instead, companies are now required to display this information in a way that ensures full visibility and comprehension for the consumer prior to any contractual commitment. Moreover, the law institutes a strict upper limit on how large these fees can be—capping them at 30 percent of the total cost of the contract. This restriction is designed to guarantee that early termination costs remain proportionate to the consumer’s overall financial obligation, preventing companies from using punitive fees to deter cancellation.
The fundamental goal of these provisions is twofold: to enable Californians to make well-informed comparisons when selecting between various service providers, and to reduce the financial hardship individuals may face if they must withdraw from an agreement due to changing circumstances. By simplifying the ability to evaluate the real cost of contractual commitments, the state aims to foster a more equitable commercial environment in which fairness and predictability serve as guiding principles.
California Assemblymember Jacqui Irwin, who authored AB 483, underscored the importance of this initiative in an official statement, emphasizing how frequently residents have been blindsided by severe and unjust early termination fees. According to Irwin, AB 483 ensures that consumers will now have a clear understanding of the potential costs associated with ending a contract ahead of schedule, while simultaneously ensuring that such fees remain within reasonable and legally defined limits. She characterized the measure as a decisive victory for consumer transparency, asserting that predictable contracts benefit not only individual customers but also the integrity and trustworthiness of California’s entire marketplace.
The announcement of AB 483 also occurred against a broader national backdrop of regulatory and legal tension surrounding consumer protection. The press release accompanying the bill openly criticized Federal Communications Commission Chair Brendan Carr for allegedly undermining consumer safeguards through proposals that would allow Internet service providers to reintroduce concealed fees—charges that customers often remain unaware of until after signing a service agreement. In addition, state officials highlighted a concurrent federal lawsuit against Adobe Systems, in which the U.S. government accuses the company of misleading customers by concealing costly early termination fees and effectively trapping users into expensive annual plans under the guise of flexible subscriptions.
While the Adobe case remains ongoing, California’s newly enacted law has the potential to extend its influence far beyond the state’s borders. If it succeeds in providing a model for transparent and consumer-conscious contracting, it could prompt nationwide reforms in how major corporations, including software giants like Adobe, structure their termination policies. In doing so, Assembly Bill 483 not only represents a victory for Californians seeking greater economic fairness but may also serve as a blueprint for future federal action to safeguard consumers across the United States from similar exploitative practices.
Sourse: https://www.theverge.com/news/799237/california-ab483-law-early-termination-fees
