It’s no secret that canceling a subscription or membership can often be a maze. Numerous businesses have written processes filled with hurdles, making customers angry as they attempt to end recurring payments. But that’s about to change. The Federal Trade Commission (FTC) has stepped in with a final Click-to-Cancel rule to simplify the cancellation process, ensuring consumers can end their subscriptions with the same ease as signing up for them.
The FTC announced this new rule, which will go into effect 180 days after it is published in the Federal Register. This comes after the extensive review process, which involved more than 16,000 public comments aimed at stamping out deceptive practices in subscription-based services.
Subscription cancellations made easy as FTC introduces Click-to-Cancel rule regulation
FTC Chair Lina M. Khan says, “Too often, businesses make people jump through endless hoops just to cancel a subscription.” Under the new rule, companies won’t be able to entrap consumers who want to opt out of their services in a confusing web of steps. The rule covers many subscription-based programs, applying to nearly all “negative option” programs. This is anything that sets up automatic renewal of memberships, enrolls people in recurring billing, or any deal in which consumers commit to regular payments while they remain silent about unsubscribing.
The rule does not end with cancellation procedures. Subscriptions are also prohibited from misrepresenting critical information to sellers when marketing. Before collecting a customer’s billing information, businesses must give clear, upfront information about how they will charge and get express consent for continuing charges.
What the new rule entails
The new Click-to-Cancel rule isn’t just about convenience, fairness, and transparency. First, it requires strict requirements of businesses that offer subscriptions and memberships as the main concern of eliminating deceptive practices. Here are the core elements of the rule:
- Clear disclosure: Businesses must present all subscription terms, especially those related to billing and cancellation, before obtaining a customer’s billing information.
- Informed consent: Before any charges are made, sellers must get the consumer’s explicit agreement to the terms, ensuring they are fully aware of what they are committing to.
- Simple cancellation: The rule demands a straightforward, hassle-free mechanism for consumers to cancel their subscriptions—similar to the ease of signing up.
In response, these changes came as the FTC convened to review its 1973 Negative Option Rule, which should’ve been updated in the age of the digital economy. Complaints about negative option subscriptions have more than doubled over the past five years: The FTC reported a steep rise in daily complaints—70 per day, sometimes as frequently as 70 per day, compared with 42 per day in 2021.
Public input shaping the future of subscription services
According to the FTC, its decision to proceed with this rule is designed to address the increasing concerns of consumers and government bodies alike. The agency also received input from various stakeholders, including federal and state agencies, trade groups, and everyday consumers, following its announcement of a notice of proposed rulemaking in March 2023. Convenient though subscriptions can be, thousands of complaints showed a growing disillusionment with companies employing confusing or misleading techniques to corral customers into services.
In the face of public feedback, the FTC revised the final rule, eliminating one or two things, such as yearly reminders for negative option features. Also, companies are no longer blocked from presenting alternative arrangements to customers seeking to pull the plug as long as they give the client a chance upon request if he is prepared to hear about such options.
What this means for businesses and consumers
The new rule creates a standard legal framework for businesses to be held more accountable. This means sellers must ensure they adhere to the new rules, which cover things like not misrepresenting facts and not failing to disclose information important to a customer before charging them.
The final rule will reduce the costs of being stuck in an unwanted service and exposed to confusing canceling processes. The FTC is putting the power back in the hands of the consumer by eliminating many of the tricks and traps that have long plagued subscription services. The FTC’s fact sheet, prepared by Bureau of Consumer Protection attorney Katherine Johnson, outlines the changes to the rule in more detail. To help with a subscription or if you suspect unfair business practices, the FTC encourages consumers to report them via its fraud reporting platform, ReportFraud.ftc.gov.
The FTC’s enforcement of fair competition and consumer protection will require businesses nationwide to change quickly to meet these new requirements. We are now to the point, whether you’re canceling a gym membership, streaming service, or magazine subscription, where it should take all of a click.
Image credits: Furkan Demirkaya/Ideogram
