FTC outlines new ‘Click to Cancel’ rules for subscriptions

The Federal Trade Commission in the United States has proposed a handful of changes that it says will make it easier for consumers to cancel recurring subscriptions and memberships. The FTC believes that its “Click to Cancel” provisions “would go a long way to rescuing consumers from seemingly never-ending struggles to cancel unwanted subscription payment plans.”

While there are currently a “patchwork of laws and regulations available to the FTC” for protecting consumers, these “do not provide consumers and industry with a consistent legal framework.” As such, here is the breakdown of the specific changes the FTC is proposing:

• A simple cancellation mechanism: If consumers are unable to easily leave any program when they want to, the negative option feature becomes nothing more than a way to continue charging them for products they no longer want. To address this issue, the proposed rule would require businesses to make it at least as easy to cancel a subscription as it was to start it. For example, if you can sign up online, you must be able to cancel on the same website, in the same number of steps.
• New requirements before making additional offers: The proposed rule would allow sellers to pitch additional offers or modifications when a consumer tries to cancel their enrollment. But before making such pitches, sellers must first ask consumers whether they want to hear them. In other words, a seller must take “no” for an answer and upon hearing “no” must immediately implement the cancellation process.
• New requirements regarding reminders and confirmations: The proposed rule would require sellers to provide an annual reminder to consumers enrolled in negative option programs involving anything other than physical goods, before they are automatically renewed.

These changes would have a wide-ranging impact, but would likely affect a number of different online services and subscriptions, including apps available via the App Store. It would also affect other subscription and membership services, such as gym memberships.

“Some businesses too often trick consumers into paying for subscriptions they no longer want or didn’t sign up for in the first place,” said FTC Chair Lina M. Khan. “The proposed rule would require that companies make it as easy to cancel a subscription as it is to sign up for one. The proposal would save consumers time and money, and businesses that continued to use subscription tricks and traps would be subject to stiff penalties.”

The FTC will soon start taking comments on these proposals before any further changes are implemented.

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