Advertiser Disclosure

Does Your Merchant Agreement Have an Auto Renewal Clause?

  • Updated on:
Advertiser Disclosure: Our unbiased reviews and content are supported in part by affiliate partnerships, and we adhere to strict guidelines to preserve editorial integrity.

angry-boyEver been surprised by an automatic contract renewal? You know how awful it feels don’t you? You get this rage in the pit of your stomach that no amount of kicking and screaming can take care of. The worst part is that you end up feeling like you have no defense whatsoever. Why? The auto-renew clause is right there in the contract that you signed, even though it may be hidden better than a ninja assassin. And to think, all this time you were waiting for the contract to end so you could walk away. Sucks doesn’t it?

When it comes to the merchant account industry, auto-renewals are everywhere, especially with the big boys. What we don’t understand though, is that these larger processors think differently than you and I. They look at their bottom-line. It’s all about the numbers to them. It would be much more expensive for them to contact each merchant come renewal time, than it is to just let the contract automatically renew on its own. And, since most merchants are either too lazy or ignorant to follow the processor’s cancellation guidelines…jackpot!

Now, this wouldn’t be much of a problem if the processor communicated the auto renew clause more effectively. It wouldn’t be a problem if the contract just went to a month-to-month agreement like most cell phone companies, but that’s usually not the case with merchant account providers. There’s usually a set term which starts at about 1-year, and goes up from there.

Speaking of terms…

What Are Typical Auto Renewal Terms?

They vary from provider to provider, but here’s the most common scenario. This is actually a snippet that I pulled from the TransFirst Merchant Services contract:

Term/Renewal. The initial term of this Merchant Agreement shall be for the term of three (3) years (the “Initial Term”) commencing on the date this Merchant Agreement is executed by authorized officers of Merchant Bank and Processor. At the expiration of the Initial Term, this Merchant Agreement will automatically renew for successive one (1) year periods (each a “Renewal Term” and collectively with the Initial Term the “Term”) unless a party provides the other parties with notice of its intent not to renew this Merchant Agreement at least ninety (90) days prior to the expiration of the then current term.

Quick Bullets:

  • 3-year term.
  • Auto-renews for successive 1-year periods.
  • You must cancel 90-days prior to 3-year term end.

Are Auto Renewal Contracts Illegal?

No. However, ever since the high profile case of Time, Inc. in 2005, many states in the U.S. have started placing regulations on how those automatic renewals need to be presented to the customer and/or enforced if necessary. Since these types of regulations are relatively new, it may take some time before your state moves forward on anything worth mentioning.

I’ll start adding to this section the states that are passing laws against auto renewals, so you can stay updated for your own sake. It’s possible that an auto-renewal clause by your provider is not compliant, thus rendering it null and void, so keep checking back periodically.

Are Auto Renewal Contracts Ethical?

Personally, I think they’re garbage. Don’t make me jump through hoops in order to leave your service. Actually, that should be a warning sign to anyone that’s thinking about working with a processor. Every merchant should ask their processor, “How hard will it be for me to leave you if I’m not satisfied with your service?”

What Should I Do If My Contract Auto Renews?

First thing you want to do is find out if the contract is enforceable. Visit the government website of the state in which the contract is bound. Usually it will be the state in which your merchant account provider resides, unless they operate in multiple states. Most contracts will have the state of compliance written directly in them.

Once you’re at that state’s government site, start a search for terms like “automatic renewal” or “auto renew.” If you don’t find anything, don’t give up. Try calling the secretary of state office to see if they can dig up anything for you on merchant account auto renewal. As I mentioned above, I’ll be adding info on each specific state, so that’ll save you some of the headache as well.

If you find out that your provider’s clause is not in compliance with state law, then be sure to bring it up to them. Provide written documentation if necessary. Chances are, you’ll be able to get out of your contract that way. Otherwise, you’ll either have to grin and bear it, or try and find a new provider that will hopefully pay the cost necessary to breach your contract.

My Two Cents

I have a wild idea for those of you that are still doing this auto-renew thing. How about you axe that policy and instead focus some manpower on keeping your merchants happy so you don’t have to trick them into spending an extra year (plus) with you?

People talk (sometimes important people), and the general consensus is that most of us don’t like auto-renewals, reverse-billing or opt-out schemes.

And, to the merchants reading this article, you no longer have the “ignorant” excuse, so please don’t sign a contract without checking to see if there’s an auto-renew clause in it.

In the famous words of the Notorious B.I.G“If you don’t know, now you know.”

Amad Ebrahimi
Amad has worked in the eCommerce and online marketing world since 2002. He started as an eBay seller, then slowly graduated to building & marketing his own websites and consulting others to do the same. He founded Merchant Maverick out of frustration with all the misinformation and shady tactics that he encountered when trying to find a merchant account for his and his client's businesses. He's the man behind most of the merchant account reviews, and articles posted on Have any questions related to credit card processing? Talk to him.
Amad Ebrahimi
Leave a comment


Responses are not provided or commissioned by the vendor or bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the vendor or bank advertiser. It is not the vendor or bank advertiser's responsibility to ensure all posts and/or questions are answered.


    Does anyone know what happens when you live in New York, but the company(United States Bankcard service) you signed a contract in is California. The company they use to process your money (Global Payments) is in Maryland. So which state do you use?


      most likely there is a clause in the contract stating that any dispute is to be settled in a specific state. read the contract. if not then it would be n the state where the dispute is filed with the court.


        is auto renewal enforceable in Colorado? and in Utah? Can you also find out about New York


          Wisconsin passed a statute requiring certain disclosures and notices in some business contracts. Does non-specific language such as “30 days prior thereto” fulfill the Date of the Deadline disclosure requirement? Or must a contract disclose the Date of the Deadline written as a specific date i.e. December 31, 2014? Are auto renewals with the non-specific language enforceable under the Wisconsin statute?

            Bob Dooley

            Do you know any details regarding the requirements/validity of automatic renewal clauses in MA?

              Max Ahmen

              Write to your legislators!!!!

              See below article:

              The state of Florida passed a new bill affecting automatic renewal of contracts. Under House Bill 751, titled, An act relating to automatic renewal of service contracts, service providers must include a clear and conspicuous clause in the contract specifying the terms of the automatic renewal, as well as give notice — between 30 and 60 days prior — that the contract will self-renew.

              This statute was signed by Florida governor, Charlie Crist, on May 12, 2010 and will affect all contracts entered into on or after July 1, 2010. As Ken Kirschenbaum of Kirschenbaum & Kirschenbaum, P.C., Garden City, N.Y., points out in a recent newsletter, the bill exempts business subscribers, but also all renewals of up to one month, which he suggests sellers should consider as a safe bet in light of similar statutes passed and likely to pass across the United States.

              At least 10 other states have passed or amended similar legislation in the past four years and ESA director of government relations, John Chwat says we will see many more follow suit. “I’m following about 23 to 24 [proposed bills] at the moment. Some have not passed this session but some are still active.” With all 50 state legislatures meeting in 2011, Chwat predicts those 23 or 24 bills could grow significantly. “It’s a big and popular issue in consumer protection at the state legislature level. And we haven’t seen the end of it.”

              In addition to Florida, states with similar, enacted, automatic renewal legislation include Arkansas, Connecticut, Illinois, New Mexico, North Carolina, New York, Pennsylvania, Tennessee and Utah.

              Of those states looking to pass anti-automatic renewal statutes, Tennessee, which currently has legislation stating automatic renewal on residential alarm contracts is permitted up to one year, is notable for drafting bills specifically targeting alarm system contractors. Senate Bill 1476 and House Bill 0786, which were opposed this session, would disallow automatic renewal clauses altogether, as well as impose other requirements on alarm system contracts.

              Bob Worthy, who as Legislative Committee chairman for the Alarm Association of Florida worked very closely with the new Florida statute, saw it develop from a potentially challenging legislative proposition to a manageable regulation. “It all boils down to education; a lot of states don’t have strong alarm associations to warn legislators as to possible pitfalls,” Worthy said. “We came out probably better off than a lot of states that passed bills with no industry representation.”

              Last year, the California Alarm Association (CAA) was able to secure an exemption from Senate Bill 340, which requires a conspicuous clause and specific approval from the subscriber on automatic renewal bids. According to an ESA press release, the CAA argued that the alarm industry is already regulated by Alarm Act statutes and the Department of Consumer Affairs via the Bureau of Security and Investigative Services. CAA also proposed that the alarm industry requires special consideration as automatic renewal of contracts ensures subscribers’ “safety and well-being.”

              “This is a significant victory because the legislature has now recognized that there are unique circumstances regarding alarm contracts and we will be able to cite the exemption in future legislative debates in other states,” reads the release.

              On the other side of the legislative coin, New York Senate Bill 7230, which would amend a previous law requiring notice of automatic renewal by certified mail, was referred to the Judiciary Committee March 24, 2010. The bill is particular to electronic and life safety alarm services and says that payment by a subscriber after a contract has expired acknowledges the extension of that contract and fulfills the notice requirements of the law already in place. This bill, as well as the California exemption, is the result of very active lobbying, according to Chwat.

              “This fall, everyone should be aware of these types of bills coming down the pipe,” Chwat advises. “If they’re not going to take a proactive stance like New York has, states should seek to get exemption like California.”

              Bob Ireland, president of the Alarm Association of Florida, advises, “All sides need to work together keeping an open mind about new legislation.” He stresses that whatever the law, “Every company should make it very clear to their client what the terms and conditions of the contract are — including what the renewal clause is.” ESA and Kirschenbaum agreed, in their respective literature, that maintaining open communication with consumers is key in avoiding negative repercussions from these statutes.

              For information on automatic renewal statutes state by state, visit

                Max Ahmen

                These auto renewal clauses DO NOT COMPLY with Contract law. Where are these politicians who are supposed to oppose these contract provisions? Bet they are too busy cozying up with the the corporate world violating our rights!


                  My state has made provisions protecting merchants from this practice. It was enacted in July of 2013. One of the last lines of the state document states: “This Act shall become effective on July 1, 2013, and shall apply only to contracts entered into on or after that date. I entered into my contract in 2010, but it auto-renewed in December of 2013.

                  So where do I stand? Is this enforceable in my case because the contract auto-renewed after the effective date of the state law? Or is it not – because the original contract was signed back in 2010?

                    Tom DeSimone

                    Hi Craig,

                    Based on similar circumstances I’ve seen, the effective date of the law would have to predate the agreement for you to be legally absolved here. (Disclosure – I’m not a lawyer and this is not legal advice!) But if you take it up with the BBB, you can usually get the early termination fee waived or at least partially waived.

                    Good luck to you, and please come back to browse our favorite providers (who do not use early termination fees).


                      I think CA SB340 might work!


                        Doesn’t ACT 192 – 2009 Senate Bill 190 void these extensions for all states?


                          There are 5 parts of a contract
                          Now which 3 parts does Auto renewal violate, one,four and Five

                          Meeting of the minds stand out, how can you agree to a contract in the future when you might not even exist. What happens when you agree at a certain price, and when thy renew they raise the price 10 fold! I am going to see what the New Federal office of Consumer Protection (CFPB) can do to end it. It seems the FTC, does nothing for the consumer.

                            Jen Hoglund

                            Since you mentioned looking at laws in each state that may make these types of contracts enforceable, have you had a chance to review Minnesota? And if yes, will you please share with me?
                            Looking at a five year contract signed in 2007 that NOW has renewed itself for five more years. What a hit. As you mentioned…Now I know. Had no idea this was even possible.
                            Jen H

                              Amad E.


                              Unfortunately I don’t know the laws in Minnesota. I’m sure you can find out that information by contacting your state attorney general.

                              Leave a Reply

                              Your email address will not be published. Required fields are marked *

                              Your Review

                              Comment moderation is enabled. Your comment may take some time to appear.
                              Please read the "User Review and Comment Policy" before posting.