Connecticut sets disclosure rules for AI subscriptions

Connecticut has enacted consumer-protection rules for subscription-based generative AI services, requiring covered providers to disclose key product limits before customers buy or renew. The requirements, scheduled to take effect Oct. 1, could affect checkout flows, app-store listings and record-keeping for AI subscriptions sold to consumers in the state.

The legislation, announced by Gov. Ned Lamont’s office, applies to certain companies that do business in Connecticut and offer publicly accessible generative AI systems to consumers on a subscription basis. According to an analysis by Covington & Burling, the law covers providers that create or produce such systems with more than 1 million monthly users.

Connecticut’s approach treats access to AI models, usage caps and feature availability as commercial terms that must be presented before a recurring charge is accepted. That is a notable shift for a market where consumer plans often combine monthly fees with limits on tokens, image generation, transcription, priority access or model tiers.

What providers must disclose

Under the law, covered providers must give consumers written notice of the material terms of the subscription before an initial purchase and before renewal. The initial notice must provide enough information for a reasonable consumer to decide whether to buy the service or keep paying for it, according to Covington’s analysis.

Those disclosures must address quantitative and qualitative restrictions on the service. Covington said the law specifically reaches limits involving tokens, image creation, image modification and transcription services. Providers also must state whether they reserve the right during the subscription period to restrict access, remove features, or reduce the amount or quality of a service component.

Renewal notices must identify new or changed restrictions. They also must explain any changes to the provider’s ability to reduce or eliminate functionality. After providing the required notice, the provider must obtain written confirmation that the consumer accepted the material terms.

The mechanism is similar to established consumer-commerce rules around recurring billing, where the enforceable bargain depends not only on price but also on what the customer was told before payment. In the AI context, the law extends that logic to the technical and operational elements of a subscription, including the level of access a customer can expect.

Compliance pressure at checkout

For AI companies, the first operational effect may be on sales and renewal screens. Providers may need to present model availability, usage allowances and potential service reductions with clarity comparable to disclosures for price, billing frequency and cancellation terms.

App marketplaces could face related pressure when they process subscriptions for AI developers. If a platform completes a sale or renewal for a covered provider, product pages and checkout steps may need to show the required information before payment is accepted.

Payment processors and merchants may also need records showing what terms were presented to a customer and when written acceptance was obtained. Such records could matter in chargebacks or inquiries by regulators, particularly where a customer says a renewed service differed materially from what was originally purchased.

The Connecticut attorney general may enforce violations under the state’s unfair or deceptive trade practices law. Covington said willful violations can carry penalties of up to $5,000 each.

Covington described the measure as the first AI-specific subscription statute it has identified. Its broader significance is that fast-changing AI services may increasingly be assessed through the same consumer-protection framework used for other recurring digital products: the recurring charge should correspond to terms the customer had a fair opportunity to review and accept.

This story draws on original reporting from PYMNTS.