California just dealt a major blow to subscription traps that have plagued consumers for years. Governor Gavin Newsom signed Assembly Bill 483 into law Friday, capping early cancellation fees at 30% of total contract value and forcing companies to disclose these costs upfront. The timing couldn't be more pointed - Adobe is currently fighting federal charges for allegedly hiding expensive termination fees in its Creative Cloud subscriptions.
California just fired the first shot in what could become a nationwide war on subscription traps. Assembly Bill 483, signed by Governor Gavin Newsom on Friday, caps early termination fees at 30% of the total contract value while forcing companies to make these costs crystal clear upfront.
The law targets a specific breed of deceptive practice that's become increasingly common across tech and media companies. Services that look like monthly subscriptions but lock users into annual contracts with punishing exit fees. Think gym memberships, but for software - where canceling your Creative Cloud subscription three months in could cost more than just paying for the rest of the year.
"Too many Californians have been shocked by outrageous early termination fees when they try to end an installment subscription early," Assembly member Jacqui Irwin said in the announcement. The shock factor was intentional, consumer advocates argue. Companies buried fee structures in dense legal language, making it nearly impossible for users to understand what they were agreeing to.
The timing of California's move isn't coincidental. Adobe is currently battling federal charges from the FTC and DOJ for allegedly trapping consumers in expensive annual subscriptions with hidden cancellation penalties. The company's Creative Cloud plans, which can cost over $600 annually, reportedly made it difficult for users to understand early termination costs during signup.
But Adobe isn't the only company in California's crosshairs. The law applies broadly to any service offering installment payment plans that mimic subscription models. This includes everything from software licenses to streaming services to fitness apps - essentially any company that lets you pay monthly for an annual commitment.
The 30% cap represents a significant reduction from current industry practices. Some companies were charging up to 50% or even the full remaining contract value as termination fees. Under the new rules, someone locked into a $600 annual Creative Cloud subscription could pay no more than $180 to cancel early, regardless of timing.
Transparency requirements might prove even more impactful than the fee caps. Companies must now display termination costs prominently during signup, not buried in terms of service documents. The law specifically bans hiding this information behind hyperlinks or in fine print that requires scrolling through pages of legalese.
