Say goodbye to subscription headaches. The Federal Trade Commission (FTC) just finalised its “click to cancel” rule, requiring companies to simplify and expedite subscription cancellation.
The FTC’s new rule will target nearly all sellers of negative option programs, a form of contract that automatically renews subscriptions unless the consumer actively opts out. Under the new rule, sellers must have consumers’ consent for subscriptions, auto-renewals, and free trials that become paid. Plus, cancelling must be as easy as signing up.
FTC Finalises ‘Click to Cancel’ Rule
Sellers will be prohibited from misrepresenting negative option features, not disclosing key terms before charging, obtaining consent without proper information, and not providing a simple cancellation process with immediate charge termination.
Additionally, the rule mandates that sellers cannot require an app or website users to cancel via chatbots or agents. In-person sign-ups must also offer phone or online cancellation.
“Too often, businesses make people jump through endless hoops just to cancel a subscription,” FTC Chair Lina Khan said in a statement. “The FTC’s rule will end these tricks and traps, saving Americans time and money. Nobody should be stuck paying for a service they no longer want.”
Most of the final rule’s provisions will go into effect six months after it’s published in the Federal Register. Initially proposed in March 2023, the rule underwent significant changes following public feedback, with over 16,000 comments received.
The final rule dropped a requirement that sellers provide yearly reminders to consumers about the negative option aspect of their subscriptions. It also removed a ban on sellers promoting alternative plans or reasons to maintain subscriptions without first inquiring if the consumer is interested.
Trade Groups Oppose FTC’s ‘Click to Cancel’ Rule
Trade groups argue that a multi-step cancellation process safeguards consumers and allows them to benefit from more advantageous offers.
In a comment submitted to the FTC, the News/Media Alliance, representing publishers, asserted that automatic renewals for newspaper and magazine subscriptions “does not result in pervasive complaints and dissatisfied consumers.”
The Association of National Advertisers expressed concern that the FTC rule might lead to more consumer inconveniences, like accidental cancellations. However, certain organisations believe the FTC’s actions are insufficient.
“The problem with free trial conversions and recurring subscriptions is that it really removes an affirmative consumer choice from the equation,” said Erin Witte, director of consumer protection for the consumer advocacy group Consumer Federation of America.
In June, the National Consumers League, a consumer advocacy organisation, sent a letter to the FTC, advocating for a more stringent proposed rule. They urged the agency to require businesses to obtain consumer consent for automatic charges within six days of a free trial’s expiration and to provide advance notice before each recurring charge.
“No honest business should depend on their customers forgetting that they’re paying money to turn a profit,” reads a statement from NCL Public Policy Manager Eden Iscil.
FTC vs. Trade Groups: Clash Over ‘Click to Cancel’ Rule
It’s no secret that the subscription model is lucrative for providers, as exemplified by Jason Derulo’s monthly car wash service, estimated to be worth $2 billion. Consequently, companies are going to great lengths to make subscription cancellation as difficult as possible.
As Samuel Levine, director of the FTC’s Bureau of Consumer Protection, explained, consumers can pay monthly fees for products or services they no longer desire or require.
Levine asserts that this is intentional. The prevalence of unwanted subscriptions has created a niche market for apps designed to assist subscribers in locating and cancelling their subscriptions.
“We know signing up for subscriptions is so easy; it is miraculous. That is why we know that the difficulty of cancellation is not an accident. It is a choice. And it’s a choice that’s causing real harm to consumers,” he told USA TODAY.
In June, the consumer watchdog, the FTC, filed a lawsuit against Amazon, accusing it of employing “manipulative, coercive, or deceptive” tactics known as “dark patterns” to trick consumers into signing up for Prime and then deliberately making it difficult to cancel.
Amazon denied the FTC’s claims, responding: “The FTC’s claims are false on the facts and the law,” Amazon spokesperson Tim Doyle said in a statement. The truth is that customers love Prime, and by design, we make it clear and simple for customers to sign up for or cancel their Prime membership.
